As the Tax Cuts and Jobs Act introduced sweeping tax changes in 2018, small business owners face a landscape of potential shifts to consider for their enterprises. To maximize the advantages brought forth by these tax modifications, it’s imperative to acquaint yourself with the intricacies of the updated tax code. Seeking counsel from a proficient small business attorney versed in these changes can prove invaluable.
Key Highlights of the Tax Changes
The prominent highlight of this legislative overhaul is the significant reduction of the corporate tax rate for C-corporations, plummeting from a maximum of 35 percent to a uniform 21 percent flat rate. This pivotal alteration applies to numerous major corporations, as well as certain smaller entities. Additionally, the tax adjustments extend their impact to businesses structured as “pass-through” entities.
Pass-Through Entities and Their Implications
A pass-through entity framework entails that the business entity itself is exempt from corporate income tax, with the tax liability channeling through to the business owners, subject to individual tax rates. This model encompasses structures like LLCs, partnerships, and sole proprietorships. The recalibrated corporate tax landscape prompts the integration of a 20 percent deduction against pass-through business income, mitigating the disparities in tax rates. Collaborating with a proficient small business lawyer facilitates the strategic positioning of your company to harness these beneficial alterations.
Navigating Depreciation Changes
The evolving tax framework also reverberates through the domain of depreciation expenses. Notably, several long-term depreciation regulations have been revised, rendering the already intricate domain of depreciation even more labyrinthine. In light of these transformations, enlisting the guidance of a seasoned business lawyer in Austin becomes paramount, offering invaluable insights into navigating the intricate tapestry of depreciation regulations.
Unpacking Impact on Small Business Deductions
Among the transformative shifts, one impactful change pertains to business deductions. Notably, deductions for entertainment expenses, select employee meals, and the reimbursement of employee commuting expenses have been entirely eliminated. A pertinent illustration of this change is the reduced deductibility, limited to 50 percent, for employee meals provided in proximity to or within the workplace.
Embracing Change with Informed Counsel
These enumerated shifts constitute merely a glimpse into the comprehensive tax modifications enacted in 2018, with further adjustments on the horizon. While several of these changes present opportunities for small businesses, there’s potential for adverse impacts as well. Navigating this dynamic landscape hinges upon your awareness of these changes and their implications for your business. Engaging an adept attorney specializing in small businesses in Austin emerges as a prudent strategy.
At the Lawyer Referral Service of Central Texas (LRS), we’re equipped to direct your requirements to a proficient, licensed, and insured attorney within your locale. A knowledgeable legal expert will not only offer insights on these transformations but empower you to harness their benefits optimally. To secure a referral, reach out to us today.
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