President Donald Trump recently signed into law the Tax Cuts & Job Act (TCJA) which is one of the most sweeping changes to the U.S. tax code in 30 years. However the sheer size of the tax bill (600 pages) has left many experts still trying to comprehend all the minute details of the bill.
To understand it, one must look at the different sections and see how it effects the different entities and individuals in our country. So for the moment let’s touch on the TCJA and how it will affect businesses in the country.
The new tax bill has significantly lowered the corporate tax rate to a flat 21%. This is seen as a huge win for major corporations, the lower tax rate is meant to boost employment and increase wages for workers on the presumption that when companies save on taxes they’ll invest that money back into the economy. Unfortunately this is yet to be seen.
Since reducing the tax rate for corporations, Congress also had to make changes for LLC and S-Corp’s AKA pass-through entities. For these pass through entities, Congress has provided a 20% reduction to income. This means LLC and S-Corp’s no longer have to pay taxes on 20% of its income.
The Congressional Budget Office claims these tax cuts will add 1.4 Trillion to the deficit by 2027, however politicians hope that the assumed economic growth and job creation will significantly reduce this deficit.
This is something we’ll all be keeping a close eye on.
If you have any questions about planning for the new law or how the new laws will affect your business please contact me directly. My email is firstname.lastname@example.org or phone: 718-790-1069.