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Roses are Red, Violets are Blue, What does the New Tax Law Mean for You?

May 24, 2022

Roses are Red, Violets are Blue, What does the New Tax Law Mean for You?

Although many people are thinking of Valentine’s Day and what to get their significant other, others are still trying to decipher the more than 1000 pages of new tax legislation that the President just signed into law. Corporate America appears to view the new tax legislation very favorably. Many large companies are giving employees one-time bonuses and others are giving employees raises and increasing starting pay.

Corporations are optimistic for several reasons: The corporate Alternative Minimum Tax for tax years after December 31, 2017 has been repealed and the corporate tax rate is fixed at a flat 21%.The 21% rate even applies to personal service corporations.The new tax law also extended bonus depreciation and allows for 100% bonus depreciation for assets acquired and placed in service after September 27, 2017. Additionally, used property (i.e: used machinery, used equipment, used tangible personal property), so long as it was not used by the taxpayer prior to its purchase, is now eligible for bonus depreciation. Smaller businesses with average gross receipts of $25 million or less also benefit in that they can utilize the cash method of accounting and are exempt from the often complicated Uniform Capitalization (“UNICAP”) rules.

Individuals can look forward to lower tax rates with rates capped at 37% for tax years beginning after December 31, 2017. The new tax legislation also increased the standard deduction for each filing status, but eliminated deductions for personal exemptions. Miscellaneous itemized deductions that are subject to the 2% floor have also been suspended. Some taxpayers will also be upset to know that the mortgage interest deduction now only applies to the taxpayer’s principal residence and no longer applies to mortgage interest associated with home equity debt.

Time will tell what overall impact the new tax legislation will have on the economy. Effective tax planning can help maximize the benefits of the new tax legislation.

Hollie is an experienced lawyer that consistently practices tax law. To learn more about Hollie or GKH, contact Hollie at 423-756-8400 or by email at hfloberg@gkhpc.com

This blog is not intended to create an attorney/client relationship or provide legal advice. Please contact the author if you have any questions or comments regarding the subject matter.

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