How the New Tax Law Changes Will Make Planning Critical in 2018

Category: Farm taxes, Farm Financials, Tax planning | No Comments

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Year-end tax planning will be critical for most taxpayers, including those who haven’t done planning in the past. The new tax law changes are significant, and there are many opportunities for financial savings you won’t want to miss.

The new 20% business deduction will be huge for sole proprietors, partnerships, LLCs, and S-Corporations. There are ways to maximize this deduction if you act now. C-Corporations have a new 21% flat tax rate. If you’re used to the old 15% tax rate, you may see a tax increase in 2018.

Have you considered whether an S-election would benefit you? The Domestic Production Activities Deduction (DPAD) has been repealed. This is the deduction you commonly receive from COOPs or your business’ production activities.  

New rules for Net Operating Losses (NOL) are in place that may require you to pay taxes even when you have a large Net Operating Loss Carryforward. This will make year-end tax planning necessary even for those taxpayers with NOLs.

Like-Kind Exchange treatment is only available for real property going forward. Make sure to consider this when trading equipment in 2018.

Tax deductions on nearly all meals will be cut in half starting in 2018. This includes meals provided for the convenience of the employer, meals while traveling, and meals while in the field. Some of these meals were 100% deductible in the past; this change will mean higher taxes for many employers. 

A new tax credit is available for employers who pay wages to employees who are out on family or medical leave. A credit is a dollar-for-dollar reduction of taxes due. If you had an employee out on leave in 2018, make sure to mention this to your tax preparer.

The section 179 deduction is available up to $1,000,000 on qualified property; this is up from $510,000 in 2017.

Bonus depreciation will be at 100% in 2018 through 2022. This means you deduct 100% of the cost on a qualified asset in the year you place it into service. Bonus is now available for new and used assets.

 

Numerous other changes may impact your personal return, including lower tax rates, higher standard deductions and child tax credits, loss of the personal exemptions, and many itemized deductions. Contact the FamilyFarms Group tax department to schedule an early tax planning meeting for tax year 2018! 

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Written By

Mary-Karen Wittman

Mary-Karen Wittman

Senior Tax Manager

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