2018 Tax Law Changes

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.

Feel free to reach out to setup a meeting by email or phone call:

josh@simpsonaccountingllc.com
(678)-925-5151