With the Tax Cuts and Jobs Act (TCJA) bill passed, signed by the President and implemented, small to midsized businesses may be feeling dazed and confused about just exactly how these changes will affect their current tax responsibilities. Business owners want to see for themselves what they should expect, in writing, from the IRS.
However, it seems that amid the many (somewhat chaotic) changes, although many of these changes for businesses are positive, the IRS is limited in their ability to keep business owners entirely updated as the changes are made. Currently, the best place to remain abreast of the ongoing updates is by frequently visiting the IRS-More in News page where you will be provided links to various notices and updated IRS news releases as they occur.
Meanwhile, we can help you prepare during the 2018 tax year, for your filing in 2019 by providing an extensive list of allowable small business deductions. By referring to this list taken from the IRS Publication -“Small Business and Self-Employed Tax Center” throughout the year, you will have an opportunity to remain proactive in maintaining federal tax compliance, and therefore you will be better prepared to file your taxes with confidence in 2019.
Below you will find the list we’ve compiled thus far. As additions present themselves, we will update this list accordingly.
2018 List of Small Business Standard Expense Deductions:
- Advertising Deductions (Excluding any advertising that would be used to influence any type of legislation).
- Uncollectible Debt
- Banking Fees
- Business Vehicle Expenses
- Donations to Charity
- Convention and Trade Show Attendance
- Education Expenses for Business Enhancement
- Business and Business Vehicle Insurance Premiums
- Intangibles – (Patents, Registrations, Intellectual Property Protections, Licensing etc.)
- Interest on Business Credit Cards, Business Loans, and/or Borrowed Funds for the Purpose of Investment.
- Repairs, Renovations, and Maintenance Expenses
- Office Machinery, Supplies, Tools, Service Expenses
- Professional Costs ie: Consulting Fees for Business Enhancement, Accounting, Legal Fees etc.
- Home Office Expenses
- Qualifying Business Income
- Entertainment and Meals – that are a physical part of the company property or company culture will be 100% deductible; you may deduct 50% on business meals and entertainment shared by clients or potential clients – There are requirements and exceptions to this category.
- Rent Payments that Have Been Paid to House Your Business (Home Offices may deduct a portion of the home that is used for business).
- Wages and Salaries
- Business Related Utility Payments – ie: Internet, Power, Water, Telephone etc.
- Company Travel Expenses
- Taxes Previously Paid
- Costs Incurred for Research and Development
- Non-Cash Rewards and Gifts
2018 Deductible Expenses for Self-Employed:
- You May Deduct Your Health Insurance Premiums For Yourself, and all of your dependents under the age of 27 years, as long as you’re either self-employed or own more than 2% of your S Corporation.
- Private Retirement Plans for Self-Employed – You may have the ability to claim qualified retirement plan contributions (these would include SIMPLE IRAs, 401(k)s, IRAs, and SEP).
- Self-Employed Moving Expenses – If you’ve moved 50 miles or more from your location for business purposes you will have the ability to deduct several expenses ie: transportation, packing, utility connection fees etc. (You must exclude meal expenses during the move and security deposits).
- Student Loan Interests may be deductible.
- Self-Employment Taxes that have been paid.
2018 Capital Expense Deductions:
- Start-Up and/or Organizational Expenses – These are expenses that are directly resulting from the creation of a business or an organization. Businesses and organizations are both able to deduct expenses related to the creation of the business or organization.
- Depreciation/Amortization – As defined by NOLO, ” The actual or theoretical gradual loss of value of an asset (particularly business equipment or buildings) through increasing age, natural wear and tear, or deterioration, even though the item may retain or even increase its replacement value due to inflation. Depreciation may be used as a business deduction for income tax reduction, spread out over the expected useful life of the asset (straight line) or at a higher rate in the early years of use (accelerated)”. *Note – Small business deductions will be conditional.
- Goods and Services Expenses – Resellers and manufacturing companies may have the ability to capitalize costs of production and any resale activities respective to the business both direct and indirect.
Despite the fact that controversies about the creation and implementation of the new tax laws remain; we must all admit (at some point) that there are some good intentions that have been woven into this particular tapestry. As always, stated positive intentions often produce incredibly positive results.
As a nation of business owners, we can choose how we will accept and use these current changes to strengthen the relationships between ourselves and our clients/customers, our families, employees, fellow business owners, and most importantly the people who make up the communities that business owners are capable of influencing. Let’s face it, how the people within our respective communities perceive our actions will definitely, make, break or leave our businesses merely idling. This is the time for business owners to accept what has been placed before them. Take these savings and reinvent your appearance within your communities, locally and in many cases, globally.
With savings from the increased deductions now available, it would be possible to consider new ideas:
- Hire new employees: young, and/or active elderly retirees
- Consider an investment in becoming equipped to hire physically disabled employees
- Create a charitable foundation or educational scholarship fund(s) for high achieving students and/or mentally or physically disabled young people who wish to continue their education.
- Sponsor someone who is raising money to help others.
- Reward your employees monetarily or perhaps with a paid day off with the only requirement being that they spend that time doing something good for themselves or others.
Options are limitless, and more importantly, whenever you give, you will always receive in one way or another. You will be recognized by your group of employees and in your community for your efforts. Think about what brings you joy and become a part of that. The laws are in place; this won’t change anytime soon. Remove yourself from the controversies and focus on all the positive trends you could well be responsible for creating. There is no better time than now to give back to those who have brought you to the place you are today. As stated by Norman Vincent Peale, author of “The Power of Positive Thinking”, Change your thoughts and you change your world.”
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: