Benjamin Franklin is credited for saying, “There are only two things certain in life: death and taxes.”
Will Roger’s added, “The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”
Wherever you stand politically, taxes are a constant debate for officials and a yearly challenge for individuals and businesses across the country. Tax rates change from year to year and filing 2018 will be no different.
“The biggest tax law change in 30 years is in effect for 2018. Everyone, whether their tax situation is simple or complex will be impacted,” says ENJ Financial Tax Manager Whitney Gum, CPA.
Gum says the key changes are larger brackets and a drop in rates, meaning the same taxable income last year will be at a lower rate.
“In addition the standard deduction has almost doubled for 2018,” Gum explains. “Every taxpayer is allowed to deduct the standard deduction or itemized deductions.”
According to Gum, some itemized deductions may be limited, but could include medical expenses, state and local taxes, mortgage interest and donations to charities. There are also a few other miscellaneous expenses that may be deductible. There is also a $10,000 cap on local and state tax deductions and Oklahoma has placed a $17,000 cap itemized deductions, excluding medical expenses and donations to charities.
Corporate tax rate has decreased to a flat 21 percent. The alternative minimum tax (AMT) has been suspended.
“Another huge change, is the implementation of the Qualified Business Income Deduction (QBID),” Gum said. “This is a 20% deduction equal to the amount of qualified business income of sole proprietorships, partnerships, and S corporations. This is an area where planning is very important to make sure the taxpayer is receiving the maximum benefit of this deduction.”
Gum said businesses have the option to expense and depreciate capital expenditures, such as machinery and equipment in the year of purchase or over time.
“This allows the taxpayer to take the deduction in the year of purchase, reducing income and lowering their tax liability,” Gum clarified. “Significant attention should be given to this decision, if the taxpayer does not anticipate similar purchases in the future or expects income to increase in future years, it may be beneficial to depreciate these assets over time and spread out the deduction.”
Some forms are due Jan. 31, including W-2 and 1099 forms.
Partnership and S Corporation returns must be filed by March 15. Individual and corporate returns are due by April 15. Extensions and some farms are exceptions.