IRS Gives more Guidance on Section 199A Tax Breaks for Certain Businesses

Thanks to the Tax Cuts and Jobs Act of 2017 (which was signed into law on December 22, 2017), and more specifically the new Section 199A (which is a part of that Act); owners of pass-through business entities may be able to substantially reduce their income tax burden.

The IRS has now issued proposed regulations, which provide guidance to determine the eligibility and the amount of any potential Section 199A deduction.  For example, many taxpayers will be limited by certain income limits ($315,000 for returns filed as “married filing jointly” or $157,500 for other filers).  Other taxpayers may be limited by the type of service their business provides.

Some of the questions we must consider concerning eligibility are: Continue reading “IRS Gives more Guidance on Section 199A Tax Breaks for Certain Businesses”

© 2018. This publication is intended for general informational purposes only and does not, nor is it intended to, provide the reader with legal advice of any kind. This publication does not, nor is it intended to, create any attorney-client relationship. Readers should consult with their own attorney to discuss the legal implications of any content in this publication to their particular situation.

SIGNIFICANT TAX CHANGES IN 2018

As you know, President Trump signed the Tax Reduction Act into law on December 22, 2017. Now that the dust has settled, businesses and individuals should take note of the more significant changes.  

For Businesses

The new law will significantly reduce corporate federal income tax rates from a maximum rate of 35% to a maximum rate of 21% for tax years beginning after December 31, 2017.

New entity selection planning is now more important as many business ventures may benefit from a 20% tax rate on certain types of pass-thru income.

The new law eliminates a taxpayer’s ability to deduct payments and legal fees relating to settlement of sexual harassment claims if the settlement is subject to a non-disclosure or confidentiality clause.

Like-kind Exchanges (Section 1031) entered into after December 31, 2017 will be limited to exchanges of real property.  Tax free exchanges of artwork, collectibles, boats and airplanes will no longer be available for like-kind exchanges.  There will be a transition rule for transactions that have been initiated by December 31, 2017.

For Individuals

Tax rates have also been reduced but the code will retain 7 graduated brackets ranging from a low of 10% to a high of 37%.

The Standard Deduction for individual taxpayers will almost double in amount from their current levels BUT there will be new limitations on itemized deductions for state, local tax or property taxes capped at $10,000.  Also home mortgage interest will only be deductible on loans up to $750,000 in value.

The new law has eliminated the personal exemption for tax years after December 31, 2017.

Estate and Gift Taxes have also been revised to double the lifetime exemption from $5 million to $10 million (indexed for inflation) which creates additional estate and gift tax planning opportunities for many of our clients.

The items listed above are just a few of the changes in this new tax law.  Tax and Estate plans should be revisited as planning put in place under the prior tax laws may now be in need of adjustment.  Riley Riper Hollin & Colagreco is ready to assist you with your estate and income tax planning, entity selection planning and tax planning for transactions to help you take advantage of the opportunities under the new law.

Please contact Bob Cohen at bobc@rrhc.com or 610-458-4400, Ext. 231 if you would like to schedule an appointment to discuss your individual situation.

 

 

© 2018. This publication is intended for general informational purposes only and does not, nor is it intended to, provide the reader with legal advice of any kind. This publication does not, nor is it intended to, create any attorney-client relationship. Readers should consult with their own attorney to discuss the legal implications of any content in this publication to their particular situation.

Client Alert: PROPOSED TAX REFORM HIGHLIGHTS

PROPOSED TAX REFORM HIGHLIGHTS

It appears with Healthcare Reform now on the “back-burner” the Administration is pressing forward with its much anticipated tax reform.  Below are some of the major highlights that are being proposed.

1.     Corporate Tax Rate – Corporate maximum tax rate of 20%.

2.    Tax Rate on Flow-Through Business Income – Flow through entity tax rate of 25% on business income after reasonable compensation income.

3.     Individual Tax Rate – Individual maximum tax rate of 35% and elimination of the 3.8% Medicare surtax on Investment Income.

4.     AMT – Repeal of the Corporate and the Individual Alternative Minimum Tax (AMT).

5.     Itemized Deductions – Elimination of most itemized deductions except for Mortgage interest and Charitable Contributions (but doubling of the standard deduction). 

6.     Capital Expensing – Immediate expensing of new investments in depreciable assets (other than structures), made after 9/27/17, for at least five years.

7.     Interest Expense – Partial limitation of interest expense incurred by a C corporation (no detail here) and consideration of appropriate treatment of non-corporate taxpayers.

8.     Domestic Production (Manufacturing) Deduction – Elimination of the Section 199 domestic production (manufacturing) deduction due to the lower tax rate incentive.

9.     R&D Tax Credit – Continued ability to claim the R&D tax credit.

10.  Estate Tax – The Estate tax and Generation Skipping Tax (GST) will be repealed but there is no mention of the gift tax.

Based on the current tax reform proposals, year-end tax planning can yield significant tax savings.  RRHC attorneys have the business and tax expertise to assist you with your estate planning and business planning.  Please contact Bob Cohen at bobc@rrhc.com if you would like to discuss your individual or business situation and gain a better understanding of how these proposals may affect you.

 

© 2017. This publication is intended for general informational purposes only and does not, nor is it intended to, provide the reader with legal advice of any kind. This publication does not, nor is it intended to, create any attorney-client relationship. Readers should consult with their own attorney to discuss the legal implications of any content in this publication to their particular situation.

Proposed IRS Regulations May Eliminate Discounting of Family Wealth Transfers

The Treasury Department has issued new proposed regulations that, if adopted as proposed, will effectively eliminate a common estate planning tool used to transfer wealth among family members. Under the current rules, transfers of minority interests of closely held business interests can be valued utilizing various discounts which results in greater tax savings.  The new proposed regulations would no longer allow discounting when making family transfers. Continue reading “Proposed IRS Regulations May Eliminate Discounting of Family Wealth Transfers”

© 2016. This publication is intended for general informational purposes only and does not, nor is it intended to, provide the reader with legal advice of any kind. This publication does not, nor is it intended to, create any attorney-client relationship. Readers should consult with their own attorney to discuss the legal implications of any content in this publication to their particular situation.