Body The Tax Cuts and Jobs Act, enacted in December 2017, affects nearly every business and individual in 2018 and the years ahead. As a small business or self-employed taxpayer, you should understand how the new tax law could affect your bottom line and how the changes for individuals relate to your business situation. A comparison for businesses This side-by-side comparison shows you what’s different after the Tax Cuts and Jobs Act and can help you plan accordingly. See how tax reform affects your business SALT – State and Local Income Tax In connection with guidance that Treasury and the IRS have provided about the TCJA’s $10,000 cap on state and local tax deductions, a revenue procedure has been released providing a safe harbor under section 162 that applies to payments made by a C corp or specified pass-through entity to a 170(c) organization in return for a state or local tax credit. Resources: Rev. Proc 2019-12PDF News Releases: IR-2019-34 Fact Sheets: FS-2019-3 NPRM - REG-107431-19 New deduction for qualified businesses (199A) Eligible taxpayers may now deduct up to 20 percent of certain business income from domestic businesses operated as sole proprietorships partnerships, S corporations and some trusts and estates. The deduction may also be claimed on certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019. Resources: Qualified Business Income Deduction Tax Tips: Tax Reform Tax Tip 2018-166 Treasury Decisions: TD REG-107892-18PDF, TD REG-107892-18 (corrected)PDF News Releases: IR-2019-158, IR-2019-34, IR-2019-115, IR-2019-130 Fact Sheets: FS-2019-3, FS-2019-8 Notices: Notice 2019-27PDF Revenue Proceedings: Rev. Proc. 2019-38PDF Withholding The Treasury Department and the Internal Revenue Service issued Notice 2018-14 and Publication 15, Employer's Tax Guide to help businesses apply law changes to withholding. These materials are designed to help employers and employees with a variety of withholding matters during and after the transition to new, reduced tax rates and updated withholding tables. More information is available in Notice 1036 and the IRS Tax Withholding Estimator Tables Frequently Asked Questions. Resources: News Releases: IR-2018-05, IR-2018-205, IR-2019-209 Tax Tips: Tax Reform Tax Tip 2019-23 Tax Withholding Estimator Deductions, depreciation and expensing Businesses can immediately expense more under the new law. A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. Resources: Comparison of changes to rules for expensing depreciable business assets under TCJA Tax Tips: Tax Reform Tax Tip 2018-68 News Releases: IR-2019-34 Fact Sheets: FS-2018-9, FS-2019-3 Notices: Notice 2019-27PDF New 100-percent depreciation deduction The new 100-percent depreciation deduction allows businesses to write off most depreciable business assets in the year they are placed in service by the business. Resources: Comparison of changes to 100-percent depreciation deduction under TCJA Small Business Initiative News Releases: IR-2018-159, IR-2018-196, IR-2018-203, IR-2018-223 REG-104397-18 Additional First Year Depreciation Deduction (Bonus) Frequently Asked Questions, Tax Reform Tax Tip 2018-157 Notice 2018-30PDF New tax law offers 100-percent, first-year ‘bonus’ depreciation Recovery period for residential rental property The general recovery period for residential rental property is 27.5 years. The law changed the alternative depreciation system recovery period for residential rental property from 40 years to 30 years. Resources: FS-2018-14 Employer deduction for certain fringe benefits The new law disallows employer deductions for (1) activities generally considered to be entertainment, amusement, or recreation; (2) membership dues for clubs organized for business, pleasure, recreation, or other social purposes; or (3) a facility used in connection with the above items, even if the activity is related to the active conduct of trade or business. It also disallows deductions for expenses associated with transportation fringe benefits or expenses incurred providing transportation for commuting (except as necessary for employee safety). Under the new law, there is now a prohibition on cash, gift cards and other non-tangible personal property as employee achievement awards. Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property.Resources: Employer Update Small Business Initiative News Releases: IR-2018-190, IR-2018-195, IR-2018-203, IR-2018-247, IR-2019-34 Notices: Notice 2018-75PDF, Notice 2018-76PDF, Notice 2081-99PDF, Notice 2019-08PDF Comparison of changes to fringe benefits under TCJA Tax Tips: Tax Reform Tax Tip 2018-162, Tax Reform Tax Tip 2018-190, Tax Reform Tax Tip 2019-21 Drop-in Articles: Tax reform affects employee achievement awards, New credit benefits employers providing paid family and medical leave Fact Sheets: FS-2019-3 Video: Employee Achievement Awards | ASL Like-kind Exchanges Like-kind exchange treatment now applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange. Resources: Comparison of changes to like-kind exchanges under TCJA Forms and Publications: Form 8824, Like-Kind Exchanges and instructions Publication 544, Sales and Other Disposition of Assets Tax Reform limits like-kind exchanges News Releases: IR-2018-227, IR-2019-34 Fact Sheets: FS-2019-3 Real estate rehabilitation tax credit TCJA keeps the 20 percent credit for qualified rehabilitation expenditures for certified historic structures, but requires that taxpayers take the 20 percent credit over five years instead of in the year they placed the building into service. The 10 percent credit for pre-1936 buildings is repealed under TCJA. This provision is effective for amounts that taxpayers pay or incur for qualified expenditures after December 31, 2017. Resources: Rehabilitation Tax Credit - Real Estate Tax Tips Comparison of changes to Rehabilitation tax credit under TCJA Tax Reform Tax Tip 2018-161 News Releases: IR-2019-34 Fact Sheets: FS-2019-3 Changes in accounting periods and methods of accounting TCJA changed the accounting procedures under several different situations. IRS guidance provides procedures for eligible businesses to obtain automatic consent to change their method of accounting. Resources: Comparison of changes in accounting periods and methods of accounting under TCJA Notices: Notice 2018-35PDF, Notice 2018-80PDF Revenue Procedures: Revenue Procedure 2018-29PDF, Revenue Procedure 2018-31PDF, Revenue Procedure 2018-35PDF, Revenue Procedure 2018-40PDF, Revenue Procedure 2019-10PDF News Releases: IR-2018-160, IR-2019-34 TD 9843PDF REG-104872-18PDF Drop-in Articles: Tax reform changes accounting method rules for businesses Fact Sheets: FS-2019-3 Corporate methods of accounting Eligible terminated S corporations are required to change from the overall cash method to an overall accrual method of accounting because of a revocation of its S corporation election, and they should make this method change for the C corporation’s first taxable year after such revocation. Resources: Comparison of changes to corporate methods of accounting under TCJA Revenue Procedures: Revenue Procedure 2018-17PDF, Revenue Procedure 2018-44PDF Drop-in Articles: S-corporations may want to convert to C-corporations News Releases: IR-2019-34 Fact Sheets: FS-2019-3 Blended Federal Income Tax Many U.S. corporations elect to use a fiscal year end and not a calendar year end for federal income tax reporting purposes. Due to a provision in the TCJA, a corporation with a fiscal year that includes Jan. 1, 2018 will pay federal income tax using a blended tax rate and not the flat 21 percent tax rate under the TCJA that would generally apply to taxable years beginning after Dec. 31, 2017. Resources: Notice 2018-38PDF IR-2018-99 Employer Credit for Paid Family and Medical Leave A general business credit employers may claim, based on wages paid to qualifying employees while they are on family and medical leave, subject to certain conditions. Eligible employers who set up qualifying paid family leave programs or amend existing programs by Dec. 31, 2018 will be eligible to claim the employer credit for paid family and medical leave, retroactive to the beginning of the employer’s 2018 tax year, for qualifying leave already provided. Notice 2018-71 provides detailed guidance on the new credit in a question and answer format. Resources: Publication 5327, New tax credit for employers who provide paid family and medical leavePDF Comparison of changes to employer credits for paid family and medical leave under TCJA Small Business Initiative Tax Tips: Tax Reform Tax Tip 2018-69, Tax Reform Tax Tip 2018-149, Tax Reform Tax Tip 2019-115 Frequently Asked Questions about Employer Credit for Paid Family and Medical Leave News Releases: IR-2018-191, IR-2019-34, IR-20, 19-166 Notice 2018-71PDF Fact Sheets: FS-2019-3, FS-2019-12 Farmers and Ranchers Many farmers and ranchers will benefit from tax law changes that affect net operating losses, pass-through entities and accounting method changes. Resources: Small Business Initiative News Releases: IR-2019-24, IR-2019-115 Tax Tips: Tax Tip 2018-169, Tax Tip 2018-170, Tax Tip 2019-23 Drop-in Articles: How tax reform affects farmers and ranchers, Tax reform changes to depreciation deduction affect farmers Fact Sheets: FS-2018-19 Notices: Notice 2019-27PDF Opportunity zones Opportunity zones are an economic development tool—that is, they are designed to spur economic development and job creation in distressed communities. Opportunity Zones are designed to spur economic development by providing tax benefits to investors. Resources: Comparison of changes to opportunity zones under TCJA Small Business Initiative Opportunity Zones Frequently Asked Questions Notice 2018-48PDF Revenue Procedure 2018-16PDF News Releases: IR-2018-206, IR-2019-75, IR-2019-212 Rev. Rul. 2018-29PDF Regulations: REG. 115420-18, REG-115420-18 (updated)PDF, REG-120186-18PDF, REG-120186-18 NPRMPDF TD 9889PDF Tax law creates new opportunity zone program Tax Reform Tax Tip 2018-191 Video: Opportunity Zones Helpful Resources Publication 5318, Tax Reform: What’s New for Your Business Tax Reform changes for business Tax Reform changes for individuals Small Business and Self-Employed Tax Center Webinars for Small Businesses Subscribe to e-News Publication 15 (PDF) Upcoming Webinars Come learn more about tax reform and how it affects you by visiting Webinars for Tax Practitioners. Partners and stakeholders Get free Recovery Rebate Credit materials to share with your customers, employees, volunteers, etc.