Since 2018, the Tax Cuts and Jobs Act (TCJA) has been in place, altering the business tax landscape in some significant ways.  Below are some of the ways these new provisions will continue to affect business owners in 2020.

New Provisions

• Qualified business income deduction:  Probably one of the most significant changes brought on by the TCJA is that taxpayers whose 2018 taxable incomes fall below $315,00 (joint) and $157,000 (individual) can qualify for a 20 percent deduction of qualified business income.  This new tax benefit also includes a 20 percent deduction for qualified real estate investment trust dividends but excludes capital gains, interest and dividend income, and employee wages.
• Credit to employers for paid family leave:  This new law allows employers a 12.5%-25% credit for wages paid to employees while on family and medical leave.

Significant Updates

• More business eligible to use the cash accounting method:  This revision significantly increases the amount of business that can use cash accounting by lowering the threshold from $25 million to $5 million annual gross receipts.
• Meals and entertainment deduction limitations:  While businesses are allowed a 50% deduction of meals, the revised law no longer provides for deduction of activities considered to be entertainment, recreation, or amusement.  The taxpayer must be present at the meal, and the meal cannot be considered lavish or extravagant.
• Limitations on Excess Business Loss:  Non-corporate taxpayers are no longer allowed to claim an excess loss,   including any Schedule C, Schedule E, and certain Schedule F activities, as well as expenses from being an employee.  Losses that were previously considered excess must now carry over to the following taxable year.

While there are many more new and updated provisions to the tax code that pertains to businesses, you can be affected by these changes as an individual as well.  For more info on how the TCJA  affects your tax situation, contact us at Complete Tax and Notary Services.  We can guide you through what you need to know.

For a complete guide to the TCJA, please read IRS Publication 5318 for your reference.