With recent tax changes continuing to evolve, small business owners must stay informed about developments that could impact their operations. The 2017 Tax Cuts and Jobs Act (TCJA) introduced many significant changes, but new rules and guidance since its passage mean business owners need to stay current. Consulting with a small business attorney who understands these tax developments can help you take full advantage of the opportunities and avoid potential pitfalls.
Corporate and Pass-Through Tax Rates
One of the most notable changes in the TCJA was the reduction of the corporate tax rate for C-corporations. The law lowered the rate from a maximum of 35% to a flat 21%, affecting many large companies and some smaller ones.
Small businesses organized as pass-through entities—such as LLCs, partnerships, and sole proprietorships—were also impacted. Instead of the business paying corporate income taxes, profits “pass through” to the owners, who report the income on their personal tax returns. To address the difference between corporate and individual tax rates, the TCJA introduced a 20% deduction on qualified business income (QBI) for pass-through entities. However, this deduction is subject to limitations, such as income thresholds and the nature of the business, so professional advice is key. A small business attorney can help determine if your business qualifies and ensure you benefit from these changes.
Depreciation Expenses: Changes and Opportunities
Depreciation rules also saw significant changes under the TCJA. The new rules expanded bonus depreciation, allowing businesses to immediately write off 100% of the cost of certain qualifying assets, such as equipment, in the year they are placed in service. This applies to both new and used assets—a shift from previous rules. However, bonus depreciation will begin to phase out in 2027 unless further legislation extends it.
These changes can make it more challenging to navigate depreciation strategies. A knowledgeable business attorney can help you determine the best way to structure asset purchases to maximize tax benefits and ensure compliance with the most recent regulations.
Business Deductions: What’s Changed?
Some changes under the TCJA have restricted common business deductions. For example:
- Entertainment expenses are no longer deductible.
- Meals provided to employees on or near the workplace are now only 50% deductible.
- Commuting expense reimbursements for employees are no longer deductible in most cases.
These changes can create unexpected challenges, especially for small business owners managing tight budgets. Working with an attorney can help you adapt to the new tax environment and explore alternatives to maintain employee satisfaction and control costs.
Stay Ahead with Professional Guidance
While the TCJA introduced many business-friendly tax provisions, some may have a negative impact on certain small businesses. Additionally, future tax changes—whether at the federal or state level—are always a possibility. The best way to protect your business is by staying informed about current rules and working with a business attorney who can provide personalized advice and ensure your business is optimized for success.
At the Lawyer Referral Service of Central Texas (LRS), we can connect you with a licensed and insured business attorney who understands the complexities of the latest tax regulations. Whether you need help restructuring your business or maximizing deductions, a qualified attorney can offer valuable insights.
Contact us today for a referral and get the professional guidance your business needs.
