How do the TCJA tax changes affect my business?

Here’s a short overview of the biggest changes for the 2018 filings.

1. Individual returns: The standard deduction has nearly doubled, which means most taxpayers will likely choose the standard deduction instead of filing with itemized deductions. But, for larger families, the tax benefit of the higher standard deduction may be offset by the loss of the personal/dependency exemption deduction. Check with your CPA on this one.
2. Child tax credit increase: The TCJA doubles the basic credit amount from $1,000 to $2,000 per qualifying child and increases its refundable portion. The TCJA also nearly quadruples the credit’s phaseout threshold for joint filers and raises it significantly for others.
3. Qualified business income (QBI) deduction: Noncorporate entities and individuals can receive a deduction of the lesser of (A) combined QBI, or (B) 20% of taxable income over net capital gain. This section was meant to provide a tax reduction for most noncorporate business income comparable to the rate reduction in corporate income taxes the TCJA provided. We’ll talk more about the QBI deduction in future blog posts.
4. 100% bonus depreciation: The TCJA allows 100% first-year special allowance (“bonus”) depreciation for property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023.
5. Net operating losses (NOLs) are limited: Starting with NOLs in tax year 2018, most NOLs may no longer be carried back, and carryovers may equal no more than 80% of taxable income for the carryover year.

Look for our next blog posts diving deeper into the QBI deduction. We’ll talk about who qualifies and how you can use the 20% deduction for trusts.