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VIEWpoint Issue 2 | 2019

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2018-2019 Tax Planning Guide

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In the wake of the Tax Cuts and Jobs Act, Michigan CPA firm Doeren Mayhew’s offers five tax tips for businesses to consider for their 2017 tax return and beyond:

1. Qualified Business Income Deduction: If you are self-employed or have a pass-through entity, such as a partnership or S corporation, you may now be eligible for a 20 percent deduction of qualified business income in 2018. Leveraging this deduction may help to reduce estimated tax payments and optimize cash flow for other business expenditures.

2. 100 Percent Bonus Depreciation: The enhanced 100 percent depreciation rule doesn’t just apply for 2018. If your corporation placed qualifying property into service last year after Sept. 27, 2017, you can take advantage of claiming the 100 percent bonus depreciation deduction on your business’s 2017 tax return. But first, you’ll need to make sure taking the bonus depreciation is better than taking the Section 179 expensing, which allows immediate expensing of up to $500,000 for property placed into service in 2017. You might find the Section 179 expensing to be more beneficial for state tax, as a result of some states not conforming to 100 percent bonus depreciation.

3. Meals and Entertainment Deduction: For 2018 meal and entertainment rules have changed. Gone are the days of expensing costs related to entertaining clients. If your business has season tickets to the Tigers, Red Wings, Lions or Pistons that are used for business purposes you can no longer deduct them. But the meal and entertainment changes don’t stop there. Meals provided to employees for convenience of the employer, which were previously fully deducted, are now limited to 50 percent. To maximize tax deductions and save time on tax preparation of your 2018 tax returns, Doeren Mayhew’s Michigan CPAs and Michigan tax advisors recommends updating your general ledger with separate accounts for new differing deduction percentages relating to business meals, entertainment and recreational/social employee expenses.

4. S-Corp Conversion: Jumping the fence from an S corporation to a C corporation, even with the new lower 21 percent tax rate, might not lower your tax exposure. Michigan CPA Firm Doeren Mayhew suggests you take a closer look at the bigger picture to consider things such as the impact from the elimination of AMT tax for corporations, shareholder compensation, use and distribution of accumulated earnings, treatment of tax attributes, international operations, legal conversion costs and much more. Getting a tax structure analysis by qualified tax advisors, like the Michigan tax advisors at Doeren Mayhew, will be key to determine what entity type provides your business with the most favorable tax liability.

5. Small Business: If you’re a small business with less than $25 million in average gross receipts you qualify for new tax breaks in 2018. You are longer required to apply UNICAP rules which likely will create a large adjustment that can be deducted in 2018. Beyond that, you can now switch from an accrual to the cash method of accounting, as well as potentially eliminating having to inventory some of your purchases. Each of these new tax breaks will help reduce tax liability and free up capital.

To find out how each of these tax-saving strategies apply to your specific situation, consult with the Michigan CPAs at Doeren Mayhew. Contact us today!


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