Taxing Issues Any Business Owner Should Know

If you own or are buying a business, you will want to be aware of the recently enacted Tax Cuts and Jobs Act (TCJA) that will affect your 2018 return and beyond.

The TCJA lowered the tax rate of “C Corporations” from 35% to 21% and provides for a new provision in the Internal Revenue Code that is known as Section 199A. The Section 199A provides a 20% deduction for owners of sole proprietors, partnerships, LLC’s and “S Corporations” (pass through business income).

For example; you are married and own a company that operates under your LLC and you earn $100,000 in 2018. Under the 199A, you would be granted a deduction of $20,000. Your marginal tax rate in 2018 is 22% so the deduction is worth $4,400 to you. Marginal tax rates vary as to whether you are single or married and by how much income your business makes. Again, for example, if you and your spouse’s LLC made $600,000 in 2018, your 199A deduction would be $120,000 with a marginal tax rate of 37%, the deduction would be worth $44,400 to you.

There are limitations and thresholds that have to be met with this new IRS code. Be sure that you and your tax advisors are up to speed so that you too may reap the benefits of the TCJA.

Roy Still

Managing Partner CBI TEAM Tulsa

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