Tax Bill: Key Takeaways for You, Your Small Business

On December 22, President Donald Trump signed the new tax bill into law. Adoption of this plan marks the biggest change to the tax code since Reagan’s Tax Reform Act of 1986. Estimated to cut $1.5 trillion in taxes over a decade, the bill affects both corporate and individual income tax rates and eliminates numerous deductions.

The individual tax cuts are set to expire in 2025, whereas most of the corporate provisions are indefinite. It’s also important to note that since the new laws don’t go in to effect until 2018, these changes will not be applied to 2017 tax return filings — the ones you have to file by April 18 of this year.

There are plenty of opposing opinions on the value and disadvantages the new tax bill imposes on small businesses owners, like the majority of veterinarians who own practices. We’ve compiled a few key points from the bill that might directly impact you and your business.

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FOR INDIVIDUALS

Standard Deduction

The standard deduction for single filers has increased to $12,000 (up from $6,350). For married couples filing jointly, the deduction has increased from $12,700 to $24,000.

Student Loan Deduction

Those who pay student loans can still claim a deduction of up to $2,500 for interest paid each year.

SALT Deduction

There is now a $10,000 cap on state and local tax deductions regardless of whether you file alone or jointly. Previously, you were able to deduct an unlimited amount for state and local property taxes.

Personal Exemption

The new tax bill eliminates the $4,050 personal exemption you could previously claim for yourself, your spouse and each of your dependents.

FOR BUSINESSES

Capital Expensing

Business owners can immediately deduct the cost of certain equipment purchased after Sept. 27, 2017. This particular provision will begin to phase out after five years.

Claims Not Covered by Insurance

This technically applies for both homes and businesses, but from 2018 through 2025, losses sustained due to fire, storm or theft that aren't covered by insurance can only be claimed if they resulted from an official national disaster. For example, someone in Houston whose veterinary practice was destroyed by Hurricane Harvey might be eligible for a deduction, while someone who lost his or her practice because of a random fire would not.

Interest Deduction

Currently, businesses may deduct interest on loans taken out for business purposes, including mortgages, term loans and lines of credit. The new bill caps the business deduction for debt interest payments at 30 percent.

Pass-Through Businesses

This is being reported as one of the more confusing elements of the new bill, but owners, partners and shareholders of S-corporations, LLCs and partnerships who pay their share of the business’s taxes through their individual tax returns will receive a 20 percent deduction for the first $315,000 of qualified business income.