What Are the 2019 Business Tax Changes?

business woman reviewing business tax changes

2019 Business Tax Changes

Owning a business can be a challenging undertaking especially with business tax changes. While you may be happy to no longer work for someone else, you now have a lot more on your plate as a business owner. You’re responsible for various aspects such as business taxes. If you’re not in compliance with your company’s tax payments and filings, then you could face legal trouble.

Now that 2020 is here, you may be concerned about new tax laws that will affect your business. As you start thinking about filing your 2019 tax return, here are some changes to keep in mind.

Lower Tax Rates

Here’s great news for small businesses concerned about business tax changes. In the past, the tax rate for pass-through entities such as sole proprietorships, partnerships, S-corporations and limited liability companies was the same as your individual tax rate. Now, you get a 20% tax deduction, as long as you’re an individual who earned less than $157,500. For joint filers, the maximum is $315,000. Service providers have to be careful, though. Doctors, lawyers, financial advisors, and others in the service field may not be able to take the deduction if their income is too high.

Higher Bonus Depreciation

For companies that buy large amounts of equipment, the bonus depreciation is a huge area for tax deductions. This area has changed regularly, and new tax reform has updated this once again for 2019. 

In the past, a company could take a huge percentage upfront, and then apply the rest in smaller percentages over the next several years. First-year bonus depreciation is now set at 100%, so if you want the entire deduction this year, then go for it. Just know you won’t receive anything for the same item next year

Under IRS law, equipment, machinery, appliances, computers, and furniture generally qualify for bonus depreciation. The item can be new or used, as long as it meets all the other requirements set forth in the law. 

CPA working on Business tax changes

No More Entertainment Expenses

Sadly, small business owners will no longer be able to deduct entertainment expenses. Sports tickets and golf outings have been removed for all business entities. While these are big-ticket items, even smaller things like meal expenses can no longer be claimed on tax returns. The law no longer allows deductions for membership dues to social or recreation clubs or tickets or admission to activities considered entertainment or recreation. This can be a huge setback to companies that rely a lot on entertaining clients to secure business deals. 

Learn More About Business Tax Changes

Laws are constantly changing. If you’re a business owner, make sure you understand what your business needs to do to stay in compliance. Ash Wasilidas, CPA Firm offers accounting and bookkeeping services to individuals as well as nonprofit and for-profit organizations. You can trust owner Ash Wasilidas to manage all of your CPA and accounting needs. To learn more about business tax changes, call (617) 462-6651 or fill out the online form.  New clients are always welcome.