This set of blog posts has been dedicated to examining the changes that will take place during the new tax year. We hope we have provided you with insight for filing your taxes, whether you’re an individual filer or are filing business taxes. In a total of four blogs, three examining individual tax changes from deductions, education and retirement and this last one focusing on business tax changes.
This blog will examine changes being made to business taxes, including deductions that can be made and how to handle filing employee benefits.
Starting this year, 2018, the rate of business miles driven has increased 54.5 cents per mile, an amount increase from 53.5 per mile last year. Another deduction increase is in Section 179 expense deduction increases to a maximum deduction of $1 million of a $2,500,000 qualifying equipment bought and installed during the current tax year. Indexed for inflation after 2018, the deduction was designed for improvements to nonresidential qualified real property: roof fire protection, alarm and security systems, heating, and ventilation and air-conditioning systems.
There is also bonus depreciation over time until the year 2026 for eligible property in service. After a four-year period, from September 27, 2017 to before January 1, 2023, in which you can deduct 100% of the cost, the deduction will begin to decrease. After the four-year period, deduction will decrease to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.
Another change, beginning December 31, 2017, Section 199 has been repealed. However, extended through 2019, the Work Opportunity Tax Credit that had been modified and enhanced for employers hiring long-term unemployed individuals, defined as being unemployed for 27 weeks or more. The 40% deduction of the first $6,000 wages paid remains unchanged this year.
Businesses with less than $50 million in gross receipts, starting in 2018, can use this credit to offset alternative minimum tax. Start-up businesses that might not have income tax liability can use this credit to offset payroll taxes, as well, not changing under the new tax law. For all taxable years starting 2018, the average dollar amount in wages is $26,700, up from $26,200 in 2017; this amount is used for limiting small employer health insurance credit and to determine who is an eligible small employer for the purposes of credit.
Businesses that provide transportation fringe benefits to their employees have a maximum monthly limitation of $260 for commuter highway vehicle, the same limitation amount for qualified parking, in 2018. This uniformity between mass transit and parking benefits was made permanent by PATH.
We hope that these posts have been helpful in providing you with insight for the new tax changes, and hopefully help you understand how each change affects you as a taxpayer. Feel free to reach out with any questions, we’re always happy to help!