In December of 2017, Congress passed and the President signed a major revision to the US tax system. For those of us who own and manage businesses, it is important to understand how the new law may impact our businesses.
First, let me be clear – I am not an accountant and I have no intention to offer advice on accounting or tax law. Specific advice and interpretation of the law should come from your own legal and accounting professionals.
Second, though you may have heard the talking heads on TV tell you this was about “simplification”, my thought is “not so much”.
The law has many provisions impacting your tax rates – increasing the standard deduction, reducing your state and local tax deductions, etc.
What I want to point out for you today are some opportunities you may have to lower your taxes while growing your business at a much quicker pace.
After my initial reading of various newspaper articles, I did what we all need to do. I consulted with my CPA and my business lawyer on how the changes in the law will impact my company. I cannot stress enough the importance of professional advice. Because of some of the changes, the legal structure of your business is going to be a very important concern.
For our businesses, other than a reduction in rates, the biggest change that will benefit our businesses is called “immediate expensing”.
What that means is that most of the business investments you make can be fully expensed in the year you make the investment. For example, a $200,000 piece of equipment which you would previously amortize over a 5 or 7 year period, now can be written off fully in the year you take possession. This results in significant tax savings and a motivation to make business investments before the scheduled expiration of this provision – currently set for 2022.
If you qualified for Section 179 – Small Business Expensing, the annual amount available for this consideration has doubled and the total allowed has been increased by 25%.
Agricultural operations are the beneficiaries of these changes as well. For our customers who sell their crops (grain), there is an unusual provision that allows for 20% deduction on all payments received on sales of your crops to Coops as opposed to sales to private or publicly traded grain companies. The Coops are going to be very busy. Strengthen your relationship now!
Many of the changes in the law are important to decisions you make today. The provisions are complicated and will impact your investment decisions and the very structure of your business enterprise. The good news is things look positive for industrial and agricultural businesses.
Seek professional advice sooner rather than later. Ask your accountant, lawyer and business advisor to help you with a plan to benefit from the provisions of the new law.
The time to invest in your business is now! Thanks for reading!
President & CEO