Article source accredited to eTruckerTax
Doubtless, you’ve heard 20 different predictions about new tax laws and your head may be spinning over how to separate truth from fiction. The accounting firm eTruckerTax provides tax guidance to businesses in transportation and manufacturing. Their analysts have sorted out the details and here are the groups they see as the new tax law’s winners and losers.
1. Regular (C) Corporations
Why? The corporate tax rate will drop from 35 percent to 21 percent. Some observers are predicting this will serve as a significant incentive for business growth via new hiring, increased salaries, and investment in heavy equipment.
2. Shareholders of Subchapter-S Corporations
Why? Under the new tax law, owners of Sub-S Corporations can receive the first $20,000 of flow-through net income tax-free. At the new 24 percent rate, that’s an instant tax savings of $4,800.
3. Single-owner LLCs
Why? Limited Liability Corporations can be inexpensively converted to either of the above entities in order to take advantage of substantial tax savings.
1. Over-the-road truck drivers paid on W-2 forms (company drivers)
Why? Under the new law, company drivers will no longer be able to deduct trucking expenses – including per diem allowance – as itemized deductions. What sounds like a disaster for company drivers may be mitigated in many cases by another change, which is the near-doubling of the standard deductions amount.
The standard deduction for single individuals will increase from $6,350 to $12,000, and the standard deduction for married taxpayers filing jointly will increase from $12,700 to $24,000. To determine if this would be the tax disaster that it sounds like, accountants at the eTruckerTax firm actually took two tax returns for company drivers at random, and re-worked them under the new tax law. They found that on one return, the tax bill went DOWN by $1,000 and on the other it went UP by about $600.
Again, for professional drivers, this elimination of deducting work/trucking expenses applies ONLY to company drivers, not to owner-operators or other drivers paid on a 1099.
Use the New Tax Law to Your Advantage
These observations represent just a few of the most relevant high points of the new law, especially for business owners. To learn more about how to use the tax law to keep more of your hard-earned money and grow your business, contact eTruckerTax at 770-984-8008.