The new tax cuts and jobs act was recently signed into law for 2018. There are some pros and cons from this passage. One of the biggest changes is the overall decrease in corporate tax rates. Last year C corporations were subject to graduated tax rates of 15% for taxable income up to $50,000, 25% for income over $50,000 to $75,000, 34% for income over $75,000 to $10,000,000, and 35% for income over $10,000,000. If you happened to own a personal service corporation, you were subject to a flat income tax rate of 35% on all of your income. Now in the 2018 tax year the corporate tax rate a flat 21%. The new flat rate is now only 25% for personal service corporations. The new tax cuts and jobs act (TCJA) also gets rid of the corporate alternative minimum tax. An additional pro of the TCJA is the increased write off amounts for §179 deductions when you purchase new vehicles and machinery. There is a new pass through 20% deduction that your business could possibly take.
There were a few downsides for businesses in the TCJA. The first con was the new 20% deduction phases out for higher income businesses and personal service companies. The 2nd and major issue has been the removal of the meals and entertainment deduction. Businesses that take clients to sports events and restaurants will be losing this deduction. Food expenses that were previously 100% write off in 2017 starting in 2018 they are now cut to 50%. The food given out at your workplace like donuts and coffee will be a reduced write off in 2018. No matter what changes go into law be prepared by planning with a professional.