Is your Business Tax-Efficient?

As business owners turn part of their attention toward paying taxes, it pays to also examine ways to become more tax-efficient, particularly in light of the Tax Cuts and Jobs Act. Here are a few features you might want to discuss with your tax and financial professionals.

Income Taxes

The basics are not so basic this year. The top federal income tax rate for C corporations fell dramatically to 21%. The new law also features a 20% “pass-through” deduction on qualified business income for entities such as S corporations, limited liability companies (LLCs) and partnerships, whose income passes through to individuals (subject to limits).

AMT Repealed

The new law also repealed the corporate alternative minimum tax (AMT). Better yet, companies may still
receive credit for previous AMT payments that exceed their regular tax liability through 2021.

NOL Disappearing

Some new tax provisions are mixed. In 2018, the deduction of net operating losses (NOL) was reduced to 80%, with no carry-back and unlimited carry-forward allowed. Previously, companies could carry back NOLs for two years and carry them forward for 20 years. Consult with your tax professional to learn how best to handle potential NOLs in light of these new tax rules.

Hire Employees

With unemployment at historic lows, it is becoming harder for companies to hire qualified workers. However, your business can reap a tax deduction for educational assistance and training expenses given to employees. Additionally, you can qualify for the Work Opportunity Tax Credit by hiring the long-term unemployed, Supplemental Security Income (SSI) recipients and other hard-to-place applicants.

Give Them Benefits

When the competition heats up for hiring the best employees, benefits can sometimes make the difference. Expenses associated with providing benefits like health insurance, life insurance and retirement plans may be tax-deductible to your business.

Give To Your Future

Retirement programs such as 401(k), SIMPLE, and Simplified Employee Pension accounts can help your employees prepare for tomorrow and reduce their taxable income. As owner and employee of your company you can benefit too, thanks to these plans’ tax advantages.