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2018 – The Year of Tax Planning Opportunities

Disclaimer: Sponsored content articles do not reflect the opinions of New Jersey Business magazine or the New Jersey Business & Industry Association.

The 2017 tax filing deadline has come and gone and the new focus for many tax accountants will be on tax reform and how it will impact their clients’ 2018 tax returns.

At KRS CPAs many of our clients are passthrough entities (i.e. their business is structured as an S-Corporation or an LLC) and the net profit or loss from the business is reported on the owner’s individual income tax return. Our practice specializes around the tax planning for these types of entities.

This year, our tax planning is around the new qualified business income deduction. Since the changes under the Tax Cuts and Jobs Act (TCJA) are not “one size fits all,” each business must be reviewed for their unique business services, structure, profit, property, and employees.

Within this analysis we identify two general types of business owners, those with owner individual adjusted gross income (AGI) at or below $157,500 if single and $315,000 if filing married joint and those with AGI above that threshold. Individuals with income at or below are allowed a deduction of 20% of their qualified business income. There is a phase-out for income up to $207,500 single and $415,000 married joint before the deduction calculation gets complicated. As a result, we have identified planning opportunities for individuals approaching the AGI limit.

Once AGI exceeds these amounts we must determine if the business is a “qualified business.” If so, a formula will provide the amount of the deduction on the individual income tax return. This formula will incorporate the business’ adjusted basis of property and wages paid. Again, much more planning opportunities exist here.

Confusion still exists regarding exactly which types of businesses will qualify for the deduction and we are anxiously awaiting clarification.  Therefore, pass-through entity business owners should not underestimate the planning opportunities under the new tax act.

The team at KRS CPAs can navigate through the complexities of the new tax law, so you can focus on running your business successfully. Contact Managing Partner Maria Rollins at mrollins@krscpas.com or 201.655.7411 to discuss your situation.

Disclaimer: Sponsored content articles do not reflect the opinions of New Jersey Business magazine or the New Jersey Business & Industry Association.