Business & Personal Tax Information
By Paul Impellicceiri
A.F. McGervey & Co., LLC
It's very hard these days to escape the news regarding tax reform. The proposals seem to change minute-to-minute, making it difficult for corporate and individual taxpayers to make important financial decisions. It doesn't appear that tax legislation, if passed, will be made retroactive to the beginning of 2017. With that being the most likely outcome, it is important to review the current tax law for its implications and planning opportunities.
Business provisions under current law:
- 50 percent bonus depreciation is available for eligible property and will continue at lower rates of 40 percent in 2018, and 30 percent in 2019 before expiring.
- Section 179 expensing limit is set at $510,000 and begins to phase out when purchases of eligible property reach $2.03 million for 2017. These limits will continue to be indexed for inflation.
- The failure of Congress to repeal the provisions of the Affordable Care Act means that more businesses will continue to deal with the reporting and withholding requirements of the legislation. As companies receive renewals of their employee benefit plans for 2018, they will need to make sure their plans continue to adhere to the provisions of the ACA, in the absence of new regulations.
- The tangible property and repair regulations as finalized continue largely unchanged. The de-minimis safe harbor amount was increased in 2016 to $2,500 ($5,000 with an Applicable Financial Statement), providing businesses with an opportunity to expense more purchases.
Individual provisions that were extended or made permanent include the following:
- The ability to make a charitable contribution directly from an IRA and exclude the distribution from income
- The state and local sales tax deduction particularly important for taxpayers in states with no income tax was made permanent.
- The American Opportunity Tax Credit, available for payments of qualified tuition and related expenses, has been made permanent.
- The tax provisions of the ACA, including the additional Medicare withholdings of .9% on salaries in excess of certain thresholds and the Medicare Surtax of 3.8% on net investment earnings, continue.
Those business owners or individuals with some ability to control the timing of their income and deductions may want to pay particular attention to the outcome of some of the tax provisions being proposed. Both the House and the Senate have proposed reducing the corporate tax rates for C-corporations and providing tax relief for pass-through entities as well.
In addition, various proposals have included reductions in individual tax rates, eliminating the deduction for state and local taxes, capping certain itemized deductions, eliminating the alternative minimum tax, and repealing provisions of the ACA. The possibility of deferring income or accelerating certain deductions may become even more important as this year-end approaches.
Paul Impellicceiri is a partner at Pittsburgh-based accounting/auditing firm, A. F. McGervey & Company, LLC and can be reached for comment at (412) 653-6101 or firstname.lastname@example.org.