Section 179 Expensing Election
Section 199A Income Deduction
Entity
Choice
Bonus
Deductions
Section 179 Expensing Election
Bonus
Deductions
Entity
Choice
TIP 1:
The 2017 federal tax reform expanded the definition of property that can qualify for this deduction. With the expanded definition of Section 179 property, qualifying taxpayers can fully expense certain assets that are not eligible for bonus depreciation.
TIP 1
Section 199A Income Deduction
Loss
Claims
Loss
Claims
Top 5 Tax Planning Strategies for Businesses
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TIP 2:
Consider purchasing furniture and fixtures,
or property, plant and equipment before the end of the year to take advantage of the 100% bonus depreciation provisions and the
more liberalized
Section 179 expensing rules resulting from
tax reform.
TIP 2
Section 179 Expensing Election
TIP 1
TIP 2
TIP 2:
If taxable income from a specified service trade or business is above the Section 199A deduction threshold, look for ways to lower your taxable income from
year-to-year in order to take advantage of
the deduction.
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TIP 1:
The Section 199A income deduction allows pass-through entities to reduce their taxable income by deducting up to 20% of qualified business income. This year, the qualified business income threshold for 2019 has been increased to $321,400 for married individuals filing joint returns, $160,725 for married individuals filing separate returns, and $160,700 for single individuals
and heads of household.
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Section 199A Income Deduction
TIP 1
TIP 2
Entity Choice
TIP 1
TIP 2
TIP 2:
Note that individuals whose business losses are not limited by tax basis rules may still be limited by the at-risk rules, the passive activity loss rules and new rules limiting excess business losses of noncorporate taxpayers. Consult with a professional to determine if this is the case.
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TIP 1:
If a shareholder of an S corporation, a partner in a partnership, or a member in an LLC wishes to claim a 2019 business loss on their own return, but the loss is projected to exceed their equity or loan basis for tax purposes, it is still possible to create tax basis to claim the loss by lending more money, or by making additional capital contributions to the entity before the end of the year.
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Loss Claims
TIP 1
TIP 2
TIP 2:
However, the bonus compensation must be paid before the end of the year if it is paid by a Personal Service Corporation to an employee-owner, or by an S corporation to any employee-shareholder, or by a C corporation to a direct or indirect majority owner.
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TIP 1:
Consider accruing a bonus deduction before year-end. An accrual basis corporation can take a deduction for its current taxable year for a bonus not actually paid to its employees until the following taxable year if certain conditions are met.
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Bonus Deductions
TIP 2:
If you are considering changing your entity status from an S corporation to a C corporation next year, you may wish to do so before December 22, 2019, to take advantage of a rule that permits certain tax-free distributions to be made beyond the expiration of the post-termination transition period, and to allow a six-year spread if you need to shift from the cash method of accounting to an accrual method.
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TIP 1:
All pass-through entities should evaluate their entity choice in light of the reduced corporate tax rate following 2017 federal tax reform. If a company decides a change in entity choice will lower its overall tax liability, it’s critical to engage a professional to navigate the complex conversion process.
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