Question

Impact of the 2018 Tax Changes...and the resulting increases vs decreases to the corporation's value

Answer 1

The significant changes to the past tax regime can be simplified to the following:

• Lower Federal Corporate Tax Rate from a maximum rate of 39% to 21%
• Limitations on interest deductibility  to 30% of a taxpayer’s “adjusted taxable income”.
• Limitations on the deductibility of operating losses to 80% of “taxable income”.
• Increased deductions for Section 179 and Bonus Depreciation in that 100% of property “placed into service” before January 1, 2023 is deductible immediately. Section 179 deprecation has increased the dollar limitation to $1M for “qualifying equipment” and there are other conditions and planning possibilities.
• The introduction of the Qualified Business Income Deduction. For tax years beginning after December 31, 2017 and before January 1, 2026 a deduction will be available for owners of Sub Chapter S corporations, partners, members and sole proprietors equal to 20% of the taxable income of a “pass-through” entity.