2018 Tax Changes For Businesses (2018 Business Tax Rules Explained!) Tax Cuts and Jobs Act 2018

2018 Tax Changes For Businesses (2018 Business Tax Rules Explained!) Tax Cuts and Jobs Act 2018

hello YouTube Mike the CPA here welcome
back to money in life TV thank you for joining me I am so excited to see you
guys today because I have some great information to share with you and this
has been a long time coming and I’ve got nick request after request after request
to make this video well finally it’s here!!! in today’s video we’re covering the
2018 tax updates for business owners from the tax cuts and Jobs Act I’ve
pulled together what I consider to be some of the biggest changes from the tax
cuts and Jobs Act and put it in the spreadsheet for you guys and the
spreadsheet as you know just like the one I’d made in my individual tax update
video is completely free for you to download so just go to this certain
section below this video you’re gonna find a link click the link and then in
the top right corner there’s a little button if you click that button you can
download it for free for yourself and you’ll have this information so you
don’t forget what we’re gonna talk about now I’m gonna try to go over this
information as quickly as possible with you guys I’m gonna try to cut out a lot
of the BS and just get straight to the point if you guys have questions which
I’m sure you’re gonna have questions because I’m gonna go over this
information pretty quickly or as quickly as possible leave those questions in the
comment section down below I’ll be happy to get back to you as soon as possible
if I can answer your question and if just leave a comment in general I love
ridding your guys comments and I love hearing from you guys let me know what
you think of all these new business tax law updates do you like them do you not
like them I would love to know what you guys think if you liked the video let me
know by hitting that like button down below it means a lot to me when you hit
that like button and of course welcome to anybody who’s brand new here today
especially if you’re checking out the channel for the first time this channel
is all about helping people become fiscally fit because we teach finances
investing and taxes all right let’s get it first thing I want to point out guys
is that some of these tax revisions may change the IRS has not released guidance
on a lot of the stuff we’re going to discuss today so just keep that in mind
before acting on any of the information you see in the spreadsheet realize this
is not legal or tax advice the rules might have changed by then based upon
when the IRS releases their guidance but I really think this video and the
spreadsheets going to give you a great overview of many of the changes of the
tax cuts and Jobs Act the first thing I want to point out is the
filing due dates these have changed some of you realize this some of you may have
not the due dates for partnerships LLC’s and single member LLC’s that are owned
by partnerships that is the due date is now March 15th the same goes with S
corporations C corporations used to be due on March 15th now they’re due on
April 17th each unity type can get a six-month
extension so partnerships LLC’s etc can be extended for six months until nine
seventeen S corporations the same way and C corporations can be extended six
months to October 2018 if you have a corporation or a business entity that
has a non calendar year end then follow these rules of how many months after the
year end of when your tax return filing is due one of the biggest changes is to
the corporate tax rates in 2017 the corporate tax rates were on the
graduated scale so as your income went up of your corporation so would your
taxable your tax rate but now in 2018 it is now a twenty-one percent flat tax
across the board so you don’t get the lowest rate but you don’t get the
highest so overall corporations are saving quite a bit under these new rules
this is set to remain permanent many if you remember many of the individual tax
laws were set to expire after about five to ten years while these business laws
are set to remain permanent note for non calendar urine companies expect to use a
blended rate of tax using a weighted average method calculation okay let’s
look at the example of the weighted average method think of a corporation
with a fiscal year ending of June 30th in this example the tax rate from July
1st of 2017 through December 31st of 2017 would be 34% roughly right well
then we have to take into account from January 1st through June 30th of 2018 it
would use the new tax rate of 21% and so you’re kind of using a weighted average
to figure out your taxable income and that instance a couple of depreciation
updates real quick guys and there’s a lot of them but I’ve just kind of
condensed some of the main ones down and remember there’s links to all this stuff
down below that will lead you to a lot more information but you’re gonna see
that into the spreadsheet here okay guys here’s some quick depreciation updates
which I think you should know about in 2017 for bonus depreciation we got
50% of qualified property so we can deduct 50% of that property right away
in 2018 it’s even better so in 2018 now we can you deduct
anywhere from 50 to 100% bonus depreciation in the first year on
qualified property and just so you guys know those new bonus rules went into
effect as of 9 28th of 2017 so it started in September of 2017 it’s gonna
carry forward from there and I don’t know if there there might be some rule
changes on this in starting in 2020 2021 but we’ll have to wait and see section
179 in 2017 we can expense up to five hundred and ten thousand dollars of
eligible assets that can take 179 2018 that’s even better we can take up to a 1
million dollar section 179 deduction a couple things to point out here on the
side so you guys can see this section 179
cannot drive your income below zero but bonus can section 179 asset threshold in
2018 is now two and a half million just so you guys know it used to be around
two million appreciation updates for autos in 2018
the maximum depreciation we could take in the first year without using bonus
was $3160 fast forward to 2018 in the first year without even using bonus we
can deduct up to $10,000 through depreciation on that vehicle
awesome awesome now let’s look at it with bonus so in 2017 with taking bonus
you can deduct up to eleven thousand 160 and the same looks to be true for 2018
you can deduct up to eleven thousand one hundred sixty dollars and with bonus
depreciation in the first year remember guys the deduction is limited if the
vehicle is not for 100% business use these rules apply up until January 1st
of 2020 and then we’ll see what happens from there standard mileage rates I’ve
listed this all out for you guys you guys can go ahead and read this for the
business mileage turtle mileage medical moving not much has changed really it’s
like a penny here penny they’re not a big deal one of the biggest changes guys
is the rules around mills and entertainment and fringe benefits so
let’s look at that right now entertainment and 2017 used to be 50%
that deductible now in 2018 it is no longer deductible entertainment for a
client so you take a client out to a movie out to dinner or whatever was 50%
deductible now it’s no longer deductible employer operated eating facilities so
let’s say you’re a big business and you have let’s say a subway within your art
like a huge cafeteria or something within your establishment
so the eating facilities in 2017 used to be 100% deductible but now in 2018 there
are only 50% deductible transportation fringe benefits used to be fully
deductible so this is really for employees so like the company would pay
for their employees transportation cost and they could fully deduct them while
starting in 2018 this is a kind of a bad thing for employees it’s no longer
deductible for the employer so so the employer can still give the benefit but
now it’s gonna be included as taxable wages on that employees w-2 if they’re
getting paid or compensated for transportation costs meals for
convenience of the employer so this is when an employer brings in mills to
their office so that employees don’t have to go out and about they can eat
eat their meal right there and keep working so in 2017 I was 100%
octuple 2018 going forward is only 50% deductible okay now let’s talk about
mils in general and this includes meals for travels in 2017 it was 50%
deductible mils are still 50% deductable in 2018 so those haven’t really changed
what about office holiday parties 2017 fully deductible 100% deductible 2018 it
is still 100% deductible but what about other things like employee gifts and
awards so in 2017 cash gift cards tickets etc it was up to $400 per award
up to $1,600 per year per employee now the rules have changed for 2018 so now
it can no longer be cash gifts gift cards and things like that now the gift
must be tangible personal property no cash no certificates gift cards tickets
etc so that really bites for employees when they could have got cash or a
better gift but the rules have changed on that okay real quick guys under
entertainment just some examples if you’re like what is entertainment it’s
things like sporting events activities clubs things like that before employer
operated and eating facilities as we discussed there’s gonna be no longer
deductible after 2025 last thing on a mission on this guy’s is meals for
convenience of the employer it’s supposed to be no longer deductible
after 2025 so just keep that in mind the last thing I want to say guys regards to
Mills entertainment things like that for accounting purposes
I say no I recommend tracking entertainment and mill expenses
separately for accounting purposes break that information out for your CPA if for
your accountant it will save them a lot of time and save you guys money on your
books if you use a CPA or an accounting professional to help you keep keep your
books up to date okay now with excessive business losses IRC section 461 this
really applies the pass-through entities so in 2018 there’s gonna be limits on
how much of a loss you can deduct for 2018 for a single individual its 250,000
for a married couple as 500,000 is the excessive business loss limitation a
couple of things to note on that aggregate tax loss from all treszura
business is included in that calculation and excess losses if you can’t use them
the good news is that they will carry forward and there’s no animal carry back
which we’re going to talk about right now but those excessive business law
can carry forward to a feature basically what used to happen guys is let’s say a
person had a really successful business well then they would go open up a
restaurant dump millions of dollars into this restaurant and try to deduct the
full thing you didn’t use it as like a huge expense offset for tax purposes
well the IRS is hammering down and they’re no longer gonna allow that hey
guys a lot of updates on net operating losses in 2017 you could do it you could
carry back the last two years or carry forward the loss or 20 years in 2018 the
carry back provision is now repealed so you can no longer carry a loss back to
previous years where you had income you can only carry it forward also in 2018
note that the net operating loss is limited to 80 percent of taxable income
other things to mention pre 2018 annals must be used up first animals can only
be carried forward starting in 2018 but can remember guys the good news is these
animals can be carried forward indefinitely so those are some of the
changes going on with net operating losses my advice to you guys is if you
have net operating losses that you want to carry him back do them now before you
can no longer do it business interests deductions limitations this area was
huge a lot of things going on here guys so now there’s the new limits cap
basically 30% cap on interest deductions so the rules state before 2022 the cap
limit follows 30% of earnings before interest taxes depreciation adjustments
after 2022 it follows earnings before interest in taxes it’s important to know
that net operating losses will affect this calculation in regards to the
carryover period on this guys if you can’t deduct the interest in that year
there’s an unlimited carryover of disallowed interest so just keep that in
mind there are exceptions to the interest cap rules and that is when
interest is used to offset business interest income or using when a lectin
real property business or for regulated Atilla tees are some examples of when
the exception applies I also remember gross receipts less than 25 million
average in less than three years there you would not have to follow these new
rules you would not be limited so as long as your gross receipts are under 25
million dollars you would not be subject to these interest deduction limitations
okay guys business research expenses there’s a lot of debate going on this
one so rules before 2021 expenses are allowed to be deducted when paid or
occurred and/or can be elected to capitalize and amortize it should not
affect their R&D credit rules starting after 2021 expenses must be capitalized
and amortized over five years 15 years if outside of us so it’s supposed to
have no effect on the R&D credit but we’ll wait and see what happens with that
so after 2021 basically with research expenses you have to capitalize them
over for at least five years like kind of exchanges oh guys this is some big
changes here exchanges other than for real property have been eliminated so
personal property so what I see a lot is people will trade in especially in a
business environment people will trade in their trucks or other business
vehicles or machine your equipment well you can no longer do a trade in on those
items and defer the tax on those you’re gonna have to pay tax at that point in
time when the item is disposed of so though really what they’re saying here
is the only items that really qualify for a true tax-deferred exchange at this
point is real estate so buildings and land and other real property like said I
put it right here that vehicles are not considered real property I think this is
gonna upset a lot of people some assets involved in real estate exchanges might
actually be taxable during the exchange so if you think of a home like let’s say
our building there’s other things involve that building there might be
fridges stoves other units of that kind of sort that is not considered real
property so when you’re doing a light kind of exchange remember you might have
to pay taxes on those other items you won’t pay you will you’ll be able to
defer the tax on the building of the land but not the other items that are in
the building last but not least guys the $1.99 a
deduction and just so you guys know I’ve listed some of the key facts here about
this deduction and we don’t even know all the rules on this yet the IRS has
virtually released no guidance on these new rules so we’re gonna have to wait to
see what happens but this this is what we know so far so I’m not gonna do a
full calculation here guys this is by far the most complex tax change in years
and it’s some people say it’s more complicated than the tax reforms that
have occurred back in 1986 if I try to explain the calculation to you guys I
would probably lose you there’s a lot of uncertainties about this steal so we’re
just gonna have to wait and see if you guys would like
learn more information I can eventually do a video on it but but let me know so
this is for help that n of these that are eligible for this $1.99 a deduction
include partnerships S corporations sole proprietorships and AG cooperatives
eligible taxpayers individuals trusts estates key facts regarding one I need
an A it’s 20% deduction on qualified business income and there’s a lot of
debate on what actually is defined by qualified business income some people
wonder if real estate income is business income it’s still up in the air the IRS
has not released any guidance on this it cannot generate an NOL so that’s
important remember and there is no deduction or offset allowed against
self-employment tax all right let’s look at the income limitations on one AAA so
if your filing status is single you’ll get the full 20% deduction if your
taxable income now we’re now listen though I’m saying
your taxable income now I told income taxable income is less than a hundred
and fifty seven thousand five hundred if you get if your income is above two
hundred and seven thousand five hundred it is likely you’ll receive no benefit
all from one ama if you’re married filing joint if your taxable income is
less than three hundred and fifteen thousand dollars then you’ll get the
full 20% $1.99 a deduction on your business income if your income if you’re
married filing joint your income is above four hundred and fifteen thousand
dollars then you’ll probably have yeah basically will get no deduction at that
point using 199 a now the good news here is guys is virtually what this is saying
that is if you have this deduction is really awesome I mean it really is
because let’s say your tax little business income is $100,000 well if you
get a 20% deduction it reduces your taxable business income by $20,000
that’s a huge advantage you get a huge tax savings right there because that’s a
lot of money that no longer has to go to the IRS the good news is if you think
about it is that most people this income is gonna be below this so most people
who own a business I would expect them to be able to get the full 20 percent
109 a deduction it’s just for the very wealthy the people who are very very
well-off will not be able to get it you get the full deduction or it will be
a limited deduction alright so let’s talk about the w-2 and non adjusted
basis limitations it’s called the phase-in so this is where it gets really
complicated but the limit is this and this all deals with $1.99 a the limit is
greater of 50% of w-2 wages or 25% of w-2 wages plus two and a half percent of
on adjusted basis we don’t know if they mean my own adjusted basis we’re
assuming they’re just talking about the on adjusted basis of the book value of
the assets but it’s not been defined by the IRS yet so we don’t even know what
they’re gonna have rule on that the phasing occurs when taxable income
exceeds three hundred fifteen thousand dollars when married filing joint which
we just talked about right up here or it exceeds one hundred fifty seven thousand
five hundred when you’re filing single so these are just some of the key facts
guys and I a couple thing to note there’s a lot of limitations on service
oriented businesses so I’ve put in a I put a note in about that it says no
special limitations may apply for specified service businesses which
industry which includes any trainer business involving the performance of
services examples include health care law accounting consulting financial
services it also includes investing and investment management or trading so that
those businesses aren’t getting this they might have further limitations
applied so they may or may not receive this deduction basically the way I
understand it is if their taxable income is below this they’re still gonna get
the deduction but if their taxable income overall is above this then
they’re gonna struggle to they might have a very limited deduction from one
on the a or they might get no benefit from it at all so it just depends but
they’re really harping down and hammered down on service businesses ok guys a
couple other things to mention real quick hobby loss rules income from a
hobby is taxable but expense deductions are no longer attack deductible this in
my opinion really kind of takes me off but so if you if a person has a hobby
they if they make income they’re supposed to report that income but now
if what they’re doing is a hobby they can’t offset that income with expenses I
honestly wonder how many people are gonna report that income in the first
place knowing that they can’t even deduct anything against it
now for anybody who has a hobby or their business has been deemed as a hobby do
the best you can to make it a legitimate business so that all the deductions and
all the expenses you incur to generate that income become tax-deductible that’s
my advice for you is try to make it a legitimate business
you know maybe mean an attorney get an operating agreements depending on the
kind of business it is form you know like the corporation or partnership
whatever but just try to run it like a real business so that you’re not subject
to these silly rules that expenses are no longer deductible the minimum tax
credit for corporations refundable up to until 2022 refundable for any tax year
beginning after 2017 and before 2022 in an amount equal to 50% 100 percent for
tax years beginning in 2021 of the excess MTC for the tax year over the
amount of the credit allowable for the year against regular tax liability I
know I lost you guys there but go ahead and you can go back to the spreadsheet
and reread that and I think it’ll make more sense to you know master production
activity deductions are been repealed but the good news is and you get the one
idea and a deduction so it’s not not all is lost not all is lost guys I went over
this pretty fast I intended to I really wanted to get straight to the point and
make this can video as short and concise as possible all my links all the links I
used to pull this information and inform this whole spreadsheet are down here and
you’ll find it by subject as I’ve color-coded it with the color coding
above for each subject you can find more information about all these different
topics and all these different articles is by clicking these links and it’ll
take you right to it okay guys I hope you enjoyed the video I
hope you got something out of that I spent a lot of time it took me several
nights during the week to make this spreadsheet took me hours to make the
spreadsheet because I couldn’t find anywhere on the entire internet where it
summarizes this information anywhere like this so this is my treat to you
guys you guys have requested it thank you for that request I think it’s a
great topic is a fun thing to talk about all right guys it’s sum this all up I
think if you’re a business owner I think these new tax laws are probably going to
be pretty favorable to most business owners but let me know what you guys
think I think there’s there’s a lot of new changes with these new tax reforms
this is actually I don’t know if you guys know
this but this is the largest tax reform we’ve had in this country since 1986 so
it’s a tremendous amount of changes but we’ll see how the regulations roll out
and see what the IRS provides as guidance especially on the one ninety
nine eighty duction there’s a lot yet to come on that so we’ll just wait and see
and if you guys have any requests on any of these topics let me know and I can
make a video about it but the topic can I could I could probably make a tenth a
twenty minute video on each one of these topics because they’re so broad and so
detailed with all the new changes involved but this was just a simple
overview so I hope you guys got something out of it remember if you like
the video guys to hit that like button to let me know you liked it be sure to
share this information with a friend especially if you know somebody who is a
business owner honestly feel free to share the spreadsheet with whomever you
think it would help I’m gonna leave a link to this video actually within the
spreadsheet near the bottom of the spreadsheet so that anybody who wants to
can go back and review this information at any time and I just would love to
hear from you guys so please drop a comment down below before you leave and
with that being said thank you so much it’s such an honor to be able to produce
videos for you guys and interact with you guys over YouTube so I will look
forward to reading your comments and questions and all that good stuff
I hope you’re wherever you’re at you’re having a wonderful week and with that
being said I hope you use this information to live your life on Kage I
will see you guys in the next video be sure to subscribe if you haven’t already
all right bye guys peace

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About the Author: Oren Garnes


  1. Video Outline and Time Stamps so you can quickly jump to any topic:

    • How to download business tax law updates spreadsheet – 0:37

    • Business filing due dates – 2:12

    • 2018 Corporate Tax Rates – 2:54

    • Depreciation updates 2018 – 4:12

    • Standard mileage rates- 6:25

    • Meals and Entertainment and Fringe benefit rules – 6:40

    • Excessive business loss limitation (IRC 461) – 9:33

    • Net Operating Loss rules for 2018 – 10:24

    • Business Interest Deduction Limitations IRC 163(j) – 11:09

    • Business Research Expense Rules 2018 – 12:10

    • Like-Kind Exchanges (1031 Rules for 2018) – 12:45

    • Section 199A Deduction – 13:54

    • Hobby Loss Rules 2018 – 18:33

    • Minimum tax credit refundable for corporations – 19:33

    • Important links – 20:08

  2. Thanks so much everyone for requesting this topic and for the support on the channel. It took me awhile to get around to making this so thanks for your patience. I could not cover every single new update, but these are a lot of the main ones. If you have any trouble downloading the spreadsheet let me know. If I missed anything please let me know and I would be happy to update the spreadsheet accordingly.

  3. *Whether you are a business owner or not what you do you think about the new tax rules for businesses. Do you like them? Not like them? Let me know what you think and leave any questions or comments you have down below**

  4. Very interesting! I think next year will be the first year I get someone to do our taxes. With our side income growing I think it will just be easier to let someone else know all the rules. 🙂

  5. Thanks a lot for the info. I learn more about taxes when I visit you channel than when I visit my tax prep, the best thing is, your videos are free jiji Keep them coming… Thanks again.

  6. Yay! 5.5k Subs, Congrats!! 🎉 You are doing awesome Mike!!!! 🤗 Love your spreadsheets!! I have a question, are these rules the same in all states or do they differ?

  7. Ah! Finally you've brought this info lol, I was requesting this a few months ago haha…

    As always, your video is full of valuable info. Thanks mate!


  8. Any tips on how to legitimize an online business? My wife hand makes items and sells them on Pinterest and Etsy. She also sells her items at Craft fairs.

  9. Thanks very much for the video. I think that this is the benefit for most people who don't spend a lot on their entertainment and eating out expenses to customers.. then there would be a few downsizings!

  10. Great thanks again. Also if you have a video specifically for Medical Practices and how we can deduct expenses, pay roll etc

  11. Hi everyone I'm posting this comment on December 23rd of 2018. I Just released a VERY Detailed video on the 199A deduction. That video can be found here. https://youtu.be/P483VTg56Lw

  12. Excellent video! I'm new to your channel, I am so happy to be here. I need to learn more about taxes because I started a general contracting business and I need to know more about tax benefits. Do you have videos regarding medical expense deductions. I have several medical bills and expenses from 2018. I would like to know if any can be offset. My parents do as well. I would like to know if cancer treatment and chemo medical expenses are deductible.

  13. Thanks for the great video and all the hard work you put into it! I have a LLC and will have a W2 and my wife will have a W2 too. Will we have the $24000 standard deduction on are W2's and the pass through income tax benefit on the LLC?

  14. I open an s corp on October 2018 when do i have to file my taxes? my accounting say when the corp have a 1 year old

  15. Hi do you have the 2nd in the series done for business examples on the 199A. I can't find it on your sight. Also do you have one on the rental (E) done

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