2020 Year-End Planning for Businesses – General Planning Information

By Douglas McAlpine, Esq., CPA

The Tax Cuts and Jobs Act offers many tax advantages for small businesses but efficiently maximizing these advantages requires proper planning.

• Qualified Business Income Deduction: Beginning in 2018, individuals with qualified business income from a sole proprietorship, partnership, trust or S-corporation, subject to limitations, are allowed to deduct up to 20 percent of their Qualified Business Income (QBI). For taxpayers with taxable income over $326,800 (married filing joint), additional tax planning may be warranted.

• Meals & Entertainment:  Starting in 2018 50% of business-related meals are still deductible, if invoiced separately from entertainment, however all entertainment expenses are now disallowed.

• Alternative Minimum Tax (AMT): The new law repealed the Alternative Minimum Tax for corporate taxpayers.

• Section 179 Expense: Typically, for business property with a useful life of more than one year, the cost must be depreciated (deducted ratably over several tax years). IRC Section 179 allows the business to fully expense the cost of eligible-tangible personal property in the year purchased. The maximum amount in 2020 that may be expensed is $1,040,000. The 2020 Section 179 deduction threshold, or phase-out range, for total amount of equipment that can be purchased now starts at $2.55 million. Please note that, unlike bonus depreciation, Section 179 is limited to your taxable income.

• Bonus Depreciation: The bonus depreciation on eligible property, which was modified to include “used” property placed in service before 2023 is increased to 100% for 2019 and then phased down by 20 percent per year thereafter.

For more information regarding year-end tax planning, please contact us at 404-255-7400 or info@hoffmanestateaw.com.