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Taxpayers Before the IRS

Business Tax Changes Effective in 2018

Re: 2017 Tax Reform Tax Cuts and Jobs Act

Corporate tax rate (C Corporations) reduced to a flat 21%.

Dividends received deduction is reduced

Alternative Minimum Tax (AMT) is repealed

Section 179 100% fixed asset expensing allowance for depreciable tangible personal property used in active conduct of a trade and  certain qualified non-residential  real property has been increased to $1 million from $500,000.The definition of qualified real property has been expanded to include roofs, heating, ventilation alarm systems etc.

Bonus depreciation (currently an additional 50% in year of acquisition) is increased to 100% for qualified property place in service after September 27, 2017 and before January 1, 2023. Qualified property now includes used property.

Automobile depreciation limits are increased.

Recovery Period for Real Property Improvements is Shortened
In the past such improvements could often only be amortized over 39 years (commercial property) or 27.5 years (non-residential real property).Under new law such improvements may be amortized over 15 years.

Limitation on Interest Expense Deduction
Under the new law interest expense is limited to 30% of the company’s adjusted taxable income. An exemption to this rule applies to Corporations whose gross receipts do not exceed $25 million.

Net Operating Loss Deduction
The 2 year carryback provisions are repealed AND any NOL deduction is limited to 80% of taxable income.

The Domestic Production Activities Deduction is repealed. This will have a negative impact on the tax liabilities of many construction based industries.

Like Kind Exchanges will now limited to real property transactions.

Entertainment Expenses. These will no longer be allowed.

Cash versus Accrual Method /Inventories
C Corps (excluding personal service corporations) and certain partnerships can now use the cash method of accounting providing their gross receipts do not exceed $25 million. Previously the limit was $5 million. These same corporations need no longer account for inventories.

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