On Dec. 20, 2017, Congress passed the most significant tax reform act in over 30 years. Business owners have been clamoring for this type of reform, but now that it’s passed, what does it mean? Who wins and who loses?
The National Association of Professional Employer Organizations produced a comprehensive 40-page breakdown of the tax bill. Don’t have the time, stomach, or patience to read it? I’ll touch on a few of the highlights.
Breaking Down the Tax Cuts and Jobs Act
While the effects probably won’t be known for a few years, the gist of the legislation is the simplification of tax filing in future years. In exchange for reducing individual and corporate tax rates, many deductions have been eliminated. The extent and scope of the net gain or loss depends on your situation.
As an individual, the reform increases your personal deduction from $10,000 to $12,000 for individuals and from $20,000 to $24,000 for married couples. There have been some changes in the child tax credit based on the age and number of children. The consensus is that this reform will be great for couples with no children, but it could be harmful to large families.
For business owners, the good news is you’re going to see reductions in your tax rates. The potential downside is a large number of you are going to see the elimination of employee work-related expenses. Among those are:
- Mileage expenses
- Union dues
- Uniform expenses
- Work safety expenses
- Travel expenses
- Moving expenses
- Casualty and theft expenses
As you can see, the trade-off costs are potentially significant and a radical departure from what you’ve been used to. With this kind of paradigm shift, it’s little wonder that most are comparing this reform to the Reagan tax reform of the mid-1980s.
Please keep in mind that these are my observations based on limited information along with input from accounting experts. Only your accountant is knowledgeable enough about your business to give you the best advice going forward.
Next Steps for Business Owners
With the elimination of a lot of expenses, you may be looking for new avenues of cost savings for your business. That’s where a PEO, like GMS, might be able to help. If you’re looking to grab control of your workers’ comp, healthcare, unemployment, and HR costs, many of the programs GMS has implemented for our 1250-plus clients can do just that. Contact us today to talk to one of our experts about how a PEO can help your business.