Every year, it's a sure bet that there will be changes to current tax law and this year is no different, now that the tax provisions under the Tax Cuts and Jobs Act of 2017 (TCJA) are in full effect. Here’s a checklist of tax changes to help businesses plan the year ahead. Next week, we’ll go over the changes for Individuals.
Standard Mileage Rates
In 2019, the rate for business miles driven is 58 cents per mile, up from 54.5 cents per mile in 2018.
Section 179 Expensing
Under the Tax Cuts and Jobs Act of 2017, the Section 179 expense deduction increases to a maximum deduction of $1,020,000 of the first $2,550,000 of qualifying equipment placed in service during the current tax year, and is indexed to inflation for tax years after 2018. The deduction was enhanced to include improvements to nonresidential qualified real property such as roofs, fire protection, and alarm systems and security systems, and heating, ventilation, and air-conditioning systems. Costs associated with the purchase of any sport utility vehicle, treated as a Section 179 expense, cannot exceed $25,500.
Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% in 2027 and years beyond.
Work Opportunity Tax Credit (WOTC)
Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.
Qualified Business Income Deduction
Eligible taxpayers are able to deduct up to 20 percent of certain business income from qualified domestic businesses, as well as certain dividends. To qualify for the deduction business income must not exceed a certain dollar amount. In 2019, these threshold amounts are $160,700 for single and head of household filers and $321,400 for married taxpayers filing joint returns.
Research & Development Tax Credit
Starting in 2018, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.
Employee Health Insurance Expenses
For taxable years beginning in 2019, the dollar amount of average wages is $27,100 ($26,600 in 2018). This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.
Business Meals and Entertainment Expenses
The deduction remains at 50% for taxpayers who incur food and beverage expenses associated with operating a trade or business. For tax years 2018 through 2025, however, the 50% deduction expands to include expenses incurred for meals furnished to employees for the convenience of the employer. Amounts after 2025, however, will not be deductible. Office holiday parties remain 100% deductible and employee meals while on business travel also remain deductible at 50%. Also eliminated is the deduction for business entertainment expenses (only meals are deductible at 50%).
Employer-provided Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, in 2019 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $265, and the monthly limitation for qualified parking is $265.
While this checklist outlines important tax changes for 2019, additional changes in tax law are more than likely to arise during the year ahead. Don't hesitate to call if you want to get started with tax planning for the year ahead.
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