Archives     Advertise     Editorial Calendar     Subscribe     Contact Us    


Tax Reform is Here ... Proceed with Caution


 

The Tax Cuts and Jobs Act (TCJA) has officially been passed and signed into law. While the TCJA was touted as a simplification of the tax code, it inherently contains many complexities.

To start, the conference report itself is 1,097 pages long. The report lists the changes that were passed related to the tax law, but it doesn't give much detail surrounding those changes. It is likely that clarification will be provided throughout 2018 and in future years. But ... understandably ... people want to know how it will affect them and their businesses sooner rather than later.

The Basics for Individuals
Rates are going down across the board for individuals, and standard deduction amounts are increasing. The deduction for miscellaneous expenses (including unreimbursed business expenses, professional fees, and investment fees) is going away. Likewise, the deduction for personal exemptions will not be available after 2017. Beginning in 2018, the deduction for sales tax will be included in the total deduction for sales and local taxes and property taxes, but it is capped at $10,000 per year.

The Basics for Businesses
Business tax rates were reduced. The federal tax rate for C-corporations was reduced to 21 percent (previously 35 percent for personal service corporations) beginning Jan. 1, 2018. But before you rush out to incorporate, keep in mind that this rate applies to income retained in the corporation. C-corps are not pass-through entities so if you take cash from the C-corp in the form of salary (deductible to the corporation, taxable to the individual), you negate the benefit of the low corporate bracket. Of course, another way to take cash from your corporation is in the form of dividends (not deductible to the corporation), which allow you to take advantage of the 21 percent rate at the corporate level. But when you combine that with the capital gains rate that you will pay on the dividends personally, you are back to a combined rate of as much as 41 percent (combined corporate and individual).

Much discussion has centered around the impact of tax reform on pass-through entities. Whereas the House proposal called for a flat tax rate for pass-through business income, the final bill provides for a 20 percent deduction of "combined qualified business income" - a complicated calculation. The most important takeaway is the fact that, for the most part, the deduction will not apply to specified service income (i.e., personal service income from a medical practice).

What's Next?
With the bill newly passed, there are more questions than answers at this point. Unfortunately, in the midst of all of the news about the tax law, there is also plenty of misinformation circulating. More clarification will come about as the dust settles. But the best advice for 2018 is to proceed with caution - and contact your tax advisor before you make any changes.


Lucy Carter, CPA, is a member (owner) in KraftCPAs PLLC and practice leader of the firm's healthcare industry team. Contact her via email at lcarter@kraftcpas.com. For more information, visit www.kraftcpas.com/healthcare.htm.






WEB:

Kraft CPAs

Tax Cuts and Jobs Act

 
Share:

Related Articles:


Recent Articles

Clover Health Flu Shot Monitor Finds Only 61% of Nashville Seniors Have Been Immunized This Season

With flu shot rates increasing only 20% over the past month, too many older Middle Tennessee residents remain unvaccinated going into the height of flu season

Read More

Jacobs Out at Acadia

Veteran healthcare CEO Joey Jacobs is out at Acadia Healthcare following a Sunday board meeting that ousted the behavioral health giant's well-known leader.

Read More

Moving beyond Wellness to Well-Being

Increasingly, healthcare providers are expanding their focus beyond physical wellness to take a more holistic view of well-being.

Read More

Seasonal Affective Disorder: The Recurring Winter Blues Storm

In the United States, 10 to 20 percent of people have a form of the winter blues, and about half a million people suffer from winter Seasonal Affective Disorder or SAD.

Read More

Competition Levels Drop in Health Insurance Markets across 25 States

Read More

Vanderbilt Comments on Patient Error, CMS Corrective Action Plan

Following a medication error last December that resulted in a patient death, Vanderbilt University Medical Center faced scrutiny by CMS, which could have potentially impacted Medicare reimbursement. However, on Nov. 29, the federal agency accepted a corrective action plan submitted by the city's academic medical center.

Read More

Lifepoint Health And Rcch Healthcare Partners Announce Completion Of Merger

Read More

Cancer Care on the Cutting Edge

Nashville physician-scientists are helping lead the way in advancing cancer care.

Read More

The Evolution of Senior Living

The senior living industry is undergoing a makeover as baby boomers shift focus from medical-directed care to hospitality-driven services.

Read More

When Basic Science Becomes a Breakthrough

Noted immunologists joined forces at the recent International Cancer Immunotherapy Conference to discuss the importance of fostering and funding basic science.

Read More

Email Print
 
 

 

 


Tags:
C-Corporations, C-Corps, KraftCPAs, Lucy Carter, Pass-Through Entities, Standard Deduction, Tax Cuts and Jobs Act, Tax Rate, Tax Reduction, Tax Reform, TCJA
Powered by Bondware
News Publishing Software

The browser you are using is outdated!

You may not be getting all you can out of your browsing experience
and may be open to security risks!

Consider upgrading to the latest version of your browser or choose on below: