“You’ll be able to file your taxes on a postcard” was the claim made by more than one person during the final weeks of 2017 when the new tax bill was being wrangled out.
If you follow politics at all, then 2017 seems so long ago.
“[The] postcard concept is out the window,” says CPA and financial advisor Mark Kohler. “Tax advisers are going to be even more critical for the small business owner.”
Okay, so what’s going on now? We can offer all sorts of moving industry advice, but we’re less (see: “legally”) confident in our tax advisory expertise. But that caveat aside, here are a few key takeaways from the recent tax reform that a small moving company owner may find interesting.
Sole Proprietorships, Partnerships, LLCs and S-Corporations
This probably includes just about everyone in the HireAHelper mover community.
You do not get any sort of break in the form of reduced taxes. Instead, these “pass-through companies” – meaning companies where income passes through to the company owners who report said income on their individual tax returns – are now able to deduct 20% from that income. This may be of interest to you, depending on how your individual taxes pencil out. (The charts in this Investopedia piece may help.)
However, any earned wages from your business that you report are excluded from your “QBI“ (Qualified business income). In other words, if you pay yourself wages out of your business income (a scenario most likely if you are an S-Corporation), you can only deduct your 20% from the business income that passes through to you as an individual. (Yes, this sort of set-up is ripe for abuse, with people adjusting their wages or salary in order to reap the biggest tax break.)
Also, if you are pulling in more than $157,500 as a single filer or ($315,000 for joint filers) you may not be eligible for the full 20% deduction, depending on how your business is classified (i.e., personal service versus employee-based). If that is the case, your best bet here is to consult a tax expert.
Deducting Costs For Trucks
Easier to comprehend is the change in how businesses can deduct the costs of depreciable assets – like vehicles, hand trucks and four-wheelers.
Whereas before, deductions for capital expenses would be made over several years, now you can deduct the full cost of any and all equipment you purchase from your taxable income for that year (up to $1,000,000).
This is perhaps the biggest boon for small business owners, as it helps ease the financial burden of purchasing the equipment that can help those owners increase productivity and grow their businesses. If you have been putting off buying that truck or updating your equipment inventory, you may now find your procrastination rewarded!
Changers For Your Customers
But for us, the most significant change in the tax code might be one that is directed not at us, but at our potential customers: As part of the tax reform, individuals will no longer be able to write off their work-related relocation expenses.
Now, could this mean that fewer people will be moving for work? Possibly. But how many have that choice? The more likely effect is that this will encourage more people to look for ways to save on their move.
Which could benefit all of us in the HireAHelper community, no matter which tax bracket we’re in.
Have a prosperous year everyone! (And good luck on your taxes!)