-Editor's Commentary-

There are a lot of changes in the new Tax Cuts & Jobs Act, which was signed into law on December 22, 2017 and takes effect in 2018.

You can use this commentary as a high-level overview of some of the most significant items in the new act. Because major tax reform like this happens so seldom, it may be worthwhile for you to schedule a tax-planning consultation early in the year to ensure you reap the most tax savings possible during 2018.

Cut Corporate Tax Rate

Cut Corporate Taxes: Changed from multi-bracket structure with 35% top rate to a flat 21% rate.

Reduces Pass-through Taxes

Most owners of pass-through entities such as S Corporations, Partnerships and sole proprietorships will see their income tax lowered with a new 20% income reduction calculator.

Increases Capital Expensing

Until 2022, short lived capital investments such as equipment and machinery may be fully expensed as soon as they are placed into service.

Strengthen Section 179

Deduction limits raised to enable expensing up to $1 Million and phaseout threshold of $2.5 Million. Section 179 may now be used on expenses related to improvements to nonresidential real estate.

AMT Removed

AMT has been completely removed for businesses.

Expands Cash Accounting

Expands cash-account method for businesses with less than $25million in gross receipts over the last three years.

Updated International Taxation

Reforms international taxation by moving to a territorial system standard in which foreign investments are generally only taxed in the place they operate. The new law allows tax deductions for certain foreign-sourced dividends, reduced tax rates for foreign intangible income and reduced tax rates for repatriation of deferred foreign income.

Expands use of 529 Education Savings Plan

Qualified Distribution for 529 now includes tuition payments for students in K-12 grades.

Business Entertainment Deduction

Repeals business entertainment deduction and cannot claim the 50 percent of the cost of entertainment, amusement or recreation directly related to their trade or business. 50 percent for meals remain in place.

Orphan Drug Credit

Orphan drug credit, the rehabilitation credit, the employer credit for paid family or medical leave and the research and experimentation credit.

Luxury Auto Depreciation

Boosts luxury auto depreciation: Luxury Autos placed in service after 2017 will have allowable depreciation of $10,000 for the first year, $16,000 the second year, $9,600 the third and $5760 for subsequent years.