By Alexandria Dembow
Typically, tax reform takes many months to pass, but this year was different. Congress introduced tax reform in November and the new bill was signed with lightning speed right before Christmas, making it the first major tax reform since 1986.
The tax reform impacts both individuals and corporations on many levels. At FWSF’s first joint event with Financial Women’s Association New York (FWA NY) on June 19, tax expert speakers Bhakti Soneji (senior vice president, head of tax, Bank of the West), Bridget McInerney Harris (attorney and partner, Jeffer Mangels Butler & Mitchell), and Sabrina Ho Stimel (tax partner, KPMG), shared their key insights on the tax reform changes and how to best respond to the Tax Cuts Job Act (TCJA). Jennifer Hansen (director, Corporate and Government Ratings, S&P) moderated and hosted.
While many technical variables are still unfolding, here are some things you should know about Tax Reform as a taxpayer:
Throughout the panel discussion, it became clear that companies and professionals will be impacted in different ways depending on your sector of business. Businesses are still figuring out the impact, scope, and scale of the tax reform. Many of the new rules are still being interpreted and applied, making it a challenging time for the tax community.
However, the TCJA most notably repealed corporate AMT and reduced the corporate tax rate from 35% to 21%. This now makes the use of a corporation as a legal entity now much more appealing.
Additionally, a 20% deduction was created for certain pass-through businesses that are considered qualified trades. Service industries that rely on reputation for their business are unfortunately excluded (professional services, health, law, etc).
The new law also limits deductions for entertainment expenses and fringe benefits will likely decrease as a result.
The impact of the TCJA primarily benefits individuals making under $200,000. High income and high property tax states are affected the most deeply. On a corporate level, most companies and business owners will see an upside to the TCJA as well. More changes and additional corrections are coming, so keeping on top of the news and new developments is crucial. There is upside if you know how to work it!
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