Make Bookkeeping Changes to Comply with New US Tax Law

Few things in life are more complicated than US congressional attempts at making things simple. This principle holds true for the latest tax simplification. To adhere to newly established standards, business owners must make some straightforward adjustments and some less-than-clear changes.

  • Businesses may no longer deduct expenditures primarily connected to entertainment or recreation (ballgames, theater tickets, fishing outings).
  • Manufacturing businesses no longer receive a domestic production activities deduction.
  • Enterprises with $25 million or more of gross receipts now have a limit on deduction of interest expense to 30% of taxable income.

The good news is that businesses will also benefit from new allowances in 2018. Specifically, bonus depreciation of 100% is allowed on purchases of both new and used assets placed in service from 2018 through 2022. Additionally, the Section 179 deduction for property purchases is now allowed for items costing up to $1 million. When applying these deductions, entrepreneurs would be wise to rely on the judgment of their tax professionals for accurate reporting.

Tax experts will certainly aid in handling the new 20% deduction of pass-through income from business entities. Company owners must navigate income threshold limitations, disregard shareholders’ salaries, and weigh business assets and wages paid-all to determine deduction limitations. Accurate accounting is now more crucial than ever for tax planning. To keep up with congressional efforts, business owners should stay in close communication with their accounting professional.