The month of May is SO significant to SO many. There is Mothers’ Day … and we all know we could not be here without them! Like so many other things (and people) in life, we are to appreciate them while they are here, and usually even more so when they move on in life.
There is Memorial Day … and we instinctively know to appreciate those who protected our country. There is the real sense of change, past and present, of seasons, graduations, families and moving on.
A big change is coming up for us at AZ Southwest CPA Services, PLLC, as we are pleased to announce that we will be moving at the end of this month to a more central location from which to serve you. It is an exciting move for us. We will be inviting you to open house events this summer and autumn to share that excitement with us. Effective May 31, 2019, we will be located at 6860 N. Oracle Road, Suite 160, Tucson, AZ 85704 in the Pima Federal Plaza.
We are here to serve you, so the rest of this newsletter is dedicated to you, to do just that!
The Rooney Slant – The Tax Cuts and Jobs Act of 2017: Planning
While each of your personal situations are different and you should make sure you fully understand the impact of each of these changes to your personal situation, here are thoughts about the recent tax bill to keep in mind for the balance of 2019 planning.
*Please note this is not a comprehensive list of changes. A follow-up newsletter is planned for the rest.
- Tax rate brackets changed significantly, on both ordinary and therefore, affected capital gain tax rate brackets.
- Luxury business vehicle (and heavy vehicles) purchase deduction limits increased “front side” deductions significantly in 2018. We believe these deductions have a big curtailment risk by the end of year 2020. Use it now if appropriate for you and your business.
- State & property tax deductions are going to remain limited to $10K in 2019. There are some legitimate ways to recharacterize a part of those
- Personal moving expenses are no longer deductible, except for government employees.
- Entertainment expenses are no longer deductible, but there are exceptions to limitations on business meals.
- The 80% charitable deduction for college athletic tickets was not extended into 2018.
- Unlike the 2017 tax act (i.e. not repeated in 2019), a second Tax Act was passed on February 9, 2018. The act, retroactive to January 1, 2017, created an opportunity to amend 2017 returns in some cases. Many of those same “extenders” were not extended again for 2018 even though this pattern had gone on for years. We do, however, expect those items to be used as a type of “voter candy” in the next election cycle. Let us know if you want a list of which “extender items” have a good chance of being included for 2019.
Items that could go either way depending on your personal situation for 2019
- Immediate expensing of qualifying business assets placed into service now to January 1, 2023.
- Increased Section 179 limit moved up in year 2018 from $500K to $1M.
- Ability to use cash basis method for companies up to $25M gross receipts test.
As we continue to learn more and as interpretations come out, we will keep our impacted clients abreast of the relevant changes.
Other planning items to consider beyond the current tax year
- As appropriate, defer revenues to 2020. Election cycles tend to not increase tax rates until the year after one (i.e. 2021). In the short run then, many business expenses and some deductible personal ones may as well be taken 2019, though they may have a chance to be more valuable after the 2020 election cycle on 2021 tax returns to be filed on April 15, 2022.
- Section 529 plans funds can now be used to pay for elementary and secondary private school ($10K per year per student) previously limited to college and trade school costs. With the “kiddie tax” rate hike on ordinary investment income of kid’s savings plans, the Section 529 plan for education expense savings accounts is more attractive. A bonus for Arizona residents, Section 529 funding is deductible on the Arizona state return to a significant degree.
Accounting and Financial Reporting Changes Ahead
More than just tax return considerations, don’t forget about all the other accounting changes coming that have to do with financial reporting as well, such as businesses issuing financial statements to lenders and others to use in decision making. These include accounting for leases and for how business bad debts are reported. In general, these will have a downward net income impact for businesses in year 2020 on the same level as activity compared to year 2019.
We look forward to resuming a quarterly tax newsletter schedule is the months ahead. We will add a pdf file / link to it in our updated website azswcpa.com.
Call or e-mail us to discuss your business, tax, and financial questions. We are here to serve your needs now, and to continue a positive impact on our community in the days ahead.
Thomas G. Rooney, CPA (and the partners and staff at)
AZ Southwest CPA Services, PLLC