2018 Tax Cuts and Jobs Act: What Does It Mean for You and Your Business?

1. 2018 Tax Cuts and Jobs Act: What Does It Mean for You and Your Business? Presented By: Ryan J. Duffy

2. GENERAL ASPECTS • Passed on December 20, 2018 • Effective for 2018 Tax Year (minor exceptions for effective 2019 – ACA Mandate) • Sunsets December 31, 2025 • Why? • Do we think this will happen? • Lower Individual and Corporate Tax Rates • Urgently needs IRS regulations and jurisprudence

3. What Does it Mean for Individuals? • Standard Deduction essentially doubled • $12,000 for Single, $24,000 for Married Filing Jointly • Fewer will itemize, but beware (more favorable aspects of charitable giving, medical deduction, etc.) • Simplify taxes for many, but not all • State and local income tax (SALT) limitation ($10k)

4. What Does it Mean for Individuals? • New Tax Brackets • More condensed • Maximum Rate is 37% (at $500k + vs. $418,400) • Elimination of Personal Exemption • Formerly $4,050 • Child Tax Credit • $2,000 (vs. $1,000) • Credit vs. Deduction

5. What Does it Mean for Individuals? • Miscellaneous Items • Charitable Deduction Treatment • Donations for Tickets • Elimination of all 2% of income misc. deductions • Medical deductible over 7.5% AGI (vs. 10%), effective 2017 • Estate and GST Taxes

6. What Does it Mean for Businesses? • General Items • Creativity will rule the day • Client Entertainment Expense eliminated • Club Dues • Tickets • Meals/Drinks • Parking still deductible? • Depreciation Increase • Interest Expense limitation of 30% (over gross receipts of $25mm) • Elimination of NOL carryback, but unlimited carryforward

7. What Does it Mean for Businesses? • Treatment of pass-through entities • Applies to: • Entity taxed under Subchapter S (can be LLC or Corp.) • Partnership • Most LLCs • In general, Taxpayer receives a 20% deduction of Qualifying Business Income (QBI) from a pass-through entity • Simple, right?!

8. What Does it Mean for Businesses? • 20% of QBI Deduction • Subject to limitations • Limited to greater of: • 50% of W-2 wage for such business; or • 25% of W-2 wages + 2.5% of qualified property • Qualified property is tangible property subject to depreciation and available for use (and used) in your business at the end of the tax year

9. What Does it Mean for Businesses? • 20% of QBI Deduction • $315,000 for MFJ or $157,500 for Single are exempt from 20% limitation • Specified Service Trade or Business • Doctors, lawyers, dentists, accountants • Architects and Engineers – Still allowed • $315k still applies

10. What Does it Mean for Businesses? • C Corporations • Same entertainment, etc. deduction limitations apply • Same favorable depreciation rules • What’s new?

11. What Does it Mean for Businesses? • C Corporations • Flat tax rate of 21% • Former rate was 35% • Why important? • Will Corporations ACTUALLY pay less? • Elimination of credits • Elimination of deductions

12. Miscellaneous • Repatriation • Estate and Gift Tax • Foreign Income • How to Proceed?

13. Miscellaneous • Questions? • Thank you!