The New Corporate is lower and permanent

The new corporate tax rate is 21 percent. And this change will live on past 2025, which is when most of the other tax-law changes are set to expire. The new rate is also a flat tax, meaning it’s the same for all C corporations — that’s different from the previous corporate tax rates, which were 15, 25, 34 and 35 percent.

In theory, this means that corporations that used to qualify for the 15 percent corporate tax rate could end up paying more in taxes, but not many businesses fell into that category.

Some Pass-Through Businesses Get A Big Deduction

Pass-through businesses are entities like S corporations, partnerships and sole proprietorships whose profits pass through to the business owners, who then pay ordinary income tax on their personal returns. If you’re a pass-through business owner, the good news is you may be able to deduct up to 20 percent of your qualified business income (the net income that comes directly from your business). The bad news? You can only take it if you meet certain qualifications inform of your AGI and filing status

The Corporate AMT is Gone For Good

Similar to the individual alternative minimum tax, corporate AMT was an additional way to calculate taxes to help ensure corporations paid a minimum amount of tax. Eliminating the corporate AMT also means getting rid of some of the tax liabilities for corporations that used to factor into the AMT calculation. For example, the cash value in permanent corporate-owned life insurance policies and any death benefits paid out were taken into account when calculating the AMT. These are typically not taxed under the regular corporate tax system..

Standard Mileage Rates 
In 2019, the rate for business miles driven is 58 cents per mile, up from 54.5 cents per mile in 2019.

Section 179 Expensing 
In 2019, the Section 179 expense deduction increases to a maximum deduction of $1,020,000 of the first $2,550,000 of qualifying equipment placed in service during the current tax year. This amount is indexed to inflation for tax years after 2018. The deduction was enhanced under the TCJA 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. Also of note is that costs associated with the purchase of any sport utility vehicle, treated as a Section 179 expense, cannot exceed $25,500.

Bonus Depreciation 
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, 20% in 2026, and 0% in 2027 and years beyond.

Work Opportunity Tax Credit (WOTC) 
Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

Qualified Business Income Deduction

Eligible taxpayers are able to deduct up to 20 percent of certain business income from qualified domestic businesses, as well as certain dividends. To qualify for the deduction business income must not exceed a certain dollar amount. In 2019, these threshold amounts are $160,700 for single and head of household filers and $321,400 for married taxpayers filing joint returns.

Research & Development Tax Credit

Starting in 2018, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.

Employee Health Insurance Expenses

For taxable years beginning in 2019, the dollar amount of average wages is $27,100 ($26,600 in 2018). This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.

Business Meals and Entertainment Expenses

The deduction remains at 50% for taxpayers who incur food and beverage expenses associated with operating a trade or business. For tax years 2018 through 2025, however, the 50% deduction expands to include expenses incurred for meals furnished to employees for the convenience of the employer. Amounts after 2025, however, will not be deductible. Office holiday parties remain 100% deductible and employee meals while on business travel also remain deductible at 50%. Also eliminated is the deduction for business entertainment expenses (only meals are deductible at 50%; receipts must identify and separate out meal costs from entertainment costs).

Employer-provided Transportation Fringe Benefits 
If you provide transportation fringe benefits to your employees in 2019, the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $265. The monthly limitation for qualified parking is $265.

While this checklist outlines important tax changes for 2019, additional changes in tax law are likely to arise during the year ahead. Don’t hesitate to call if you have any questions or want to get a head start on tax planning for the year ahead.