By: M.Alequin
This tax season will be very hard for many. Not only the government has started with a "shutdown" in most of our federal departments but, we begin season 2018 with a new imposed federal tax laws that could make tax bills worst for some and better for others. The "Tax Cut Job Act" of 2018 is full of many changes. It requires you to carefully plan for the future tax years and make changes in your company policies. It requires a lot of work which you as a business owner should have started early in 2018. Here is a summary of a few changes in the new TCJA. very complicated so, I suggest you set up an appointment with your accountant to learn more about the new tax law.
a) No more entertainment meals or events, only business meals
b) No more 2% business deductions
c) No more moving expenses
d) State tax deduction has been capped at $10,000
e) No more mortgage interest in 2 mortgage loans unless strictly for home improvements
f) No more interest mortgage for home purchases of more than $750,000. Interest expense deduction will be calculated
These are important changes in the taxes we paid
Social Security tax. Everyone must pay a Social Security tax on all compensation up to $128,400 of income for the year. The rate is 6.20% of your gross wages or business income if you are a sole proprietor or a one member LLC.
Medicare tax. Everyone must pay Medicare tax on all compensation, so another 1.45 percent will be deducted for Medicare tax.
Federal income tax. Federal tax rates have changed. The new rates start at 12% through 38%.
State income tax. If your state imposes an income tax, and most states do, state income tax will be withheld at whatever rate is required by state law. Consult your accountant to see what is your marginal state tax rate after filing your state tax return.
Other information
Retirement plan contributions. Many employers offer employees retirement benefits. Even if you are the only one contributing the the plan(your employer doesn't match any of the contributions) it is always a good idea to find out more about this benefit even though you may feel you can't afford another deduction. This one may be a very good one especially if, you are young. Contact your human resource department and learn more about it if your company is offering you a retirement plan.
