Recap of Business Tax Provisions for 2018

Dec 18, 2018 | Newsletter

Here’s what business owners need to know about tax changes for 2018.

Standard Mileage Rates
The standard mileage rate in 2018 is 54.5 cents per business mile driven.

Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000 (adjusted annually for inflation). In 2018 this amount is $53,200.

In 2018 (as in 2014-2017), the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers. For tax years 2010 through 2013, the maximum credit was 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.

Section 179 Expensing and Depreciation

Under the Tax Cuts and Jobs Act of 2017, the Section 179 expense deduction increases to a maximum deduction of $1 million of the first $2,500,000 of qualifying equipment placed in service during the current tax year. The deduction was indexed to inflation after 2018 and 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.

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, and 20% in 2026. The standard business depreciation amount is 25 cents per mile (same as 2017).

Please call if you have any questions about Section 179 expensing and the bonus depreciation.

Work Opportunity Tax Credit (WOTC)

Extended through 2019, the Work Opportunity Tax Credit remained under tax reform and can be used by employers who hire long-term unemployed individuals (unemployed for 27 weeks or more). It is generally equal to 40 percent of the first $6,000 of wages paid to a new hire. Please call if you have any questions about the Work Opportunity Tax Credit.

SIMPLE IRA Plan Contributions
Contribution limits for SIMPLE IRA plans increased to $12,500 for persons under age 50 and $15,500 for persons age 50 or older in 2018. The maximum compensation used to determine contributions is $275,000.

Please contact the office if you would like more information about these and other tax deductions and credits to which you are entitled.

Choosing the Optimal Accounting Method for Tax Savings

Choosing the Optimal Accounting Method for Tax Savings

The accounting method your business uses to report income for tax purposes, either cash or accrual, can significantly impact your tax bill. While the cash method can offer tax-saving opportunities, the accrual method may in some cases be more appropriate or even...

What’s Your Business Exit Strategy?

What’s Your Business Exit Strategy?

Ever since you became a business owner, you’ve focused on growing revenue, managing expenses and leveraging tax advantages. But don’t overlook a critical element of your long-term financial well-being, that is, a business exit strategy. Ideally, your exit strategy...

Marriage and Taxes: Key Changes After Saying ‘I Do’

Marriage and Taxes: Key Changes After Saying ‘I Do’

It may not be as fun to plan as the wedding venue, invitations and attire, but marriage can result in changes affecting essential tax issues that need prompt attention following the wedding: Name. If your name has changed, report it to the Social Security...