General Tax Strategies for Business Owners

Special 100 Percent Bonus Depreciation—Under the TJCA, businesses are able to deduct 100% of the cost of new OR used business assets purchased and placed in service beginning on Sep. 27, 2017 if they have a useful life of 20 years or less. The 100% deduction is only available through 2022 and is phased down to 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.

Section 179 Deduction—Section 179 allows businesses to expense the full cost of new or used equipment. The 2020 limit is $1,040,000 for qualifying property. Section 179 expensing is subject to phase outs if a business added more than $2,590,000 of assets; the deduction is reduced dollar for dollar.

Section 1202 Qualified Small Business Stock—Taxpayers may exclude 100% of gain on the sale or exchange of Qualified Small Business Stock held over five years. Certain restrictions apply in determining eligibility of the stock, and the exclusion from gross income is limited to the greater of $10 million or ten times the taxpayer’s stock basis.

Section 199A Qualified Business Income Deduction—Taxpayers who have qualified business income (QBI) related to their pass-through activities or solely owned businesses may qualify for the deduction. While subject to several limitations and exceptions, many taxpayers will be able to deduct up to 20% of their QBI.

Repair Regulations—Under the De Minimis Safe Harbor rules, taxpayers may deduct up to $2,500 per invoice for items related to repairs or improvements of property. Due to the complexity of these rules, you should discuss any plans you may have with us.

Hot Button Issues

  • State and local taxes that went into effect this past year on Jan. 1, 2020 include:
    • B&O workforce education surcharge for “services and other activities” business categories
    • Washington Paid Family and Medical Leave Act
    • City of Seattle Commuter Benefits Ordinance
  • In June 2018, the Supreme Court issued an opinion on state taxes in South Dakota v. Wayfair. This case involved the assessment of sales taxes on out-of-state businesses. Clients with sales in multiple states should remain aware of the rules and economic nexus thresholds for each state. For example, Washington state has declared that remote sellers with $100,000 or more in retail sales to Washington purchasers must collect and remit sales tax. In light of this decision, states will be more assertive in subjecting business located outside of their borders to sales tax and other business tax reporting requirements.
  • Work Opportunity Tax Credit Expiring in 2020

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