2018 Tax Law Changes
Please note these changes do not apply for 2017 tax returns!
Here are some but not close to all of the 2018 tax law changes:
- Lower individual tax brackets until 2025
- nice….. (see 2018 tax bracket below)
- Corporate tax rate changes from 35% to 21%
- That is a HUGE change! Hopefully Corporate America will use these large savings to give you the raise you deserve!
- Double standard deduction
- Married filing jointly standard deduction jumps from $12,700 to $24,000
- Benefits lower income earners
- Lower taxes for Sole Proprietors, S Corps, Partnerships (But C Corps are getting much more benefit)
- lessor of: deduction of 20% of business owner’s share of business income or 50% of that business owner’s W2 wages.
- Unfortunately 20% deduction is not available for lawyers, doctors, cpa’s and other certain professional businesses making over $415k married filing jointly
Clear as mud? See example below with Logan and Hadley
2018 Tax Brackets:
Example of new tax law for an S Corp:
- Logan and Hadley own a Company 50% / 50%. During 2018 their Company has total revenue of $1M. Logan and Hadley both had W2 wages of $80,000 during 2018.
- Logan would receive a 20% deduction on his share of business income equaling $100,000 ($500,000 * .20)
- But, the deduction cannot exceed 50% of Logan’s W2 wages which equals $40,000 for 2018.
- So, Logan would be entitled to a deduction of $40,000 on his share of all S Corp related income for 2018.
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