NASHVILLE, Tenn. — With the constant changes in tax laws, Brian McCuller, shareholder-in-charge of the tax practice at Tennessee-based LBMC, has created a list of key changes in tax laws business owners should consider as they finalize their planning for 2017. To view the company’s complete tax guide, click here.
Section 179 expensing/bonus depreciation
a) Expense provision: Capital investments of up to $500,000 for certain property placed in service from 2015 to 2019, including HVAC units, can be taken as an expense deduction rather than depreciation. The break phases out for asset purchases above $2 million. HVAC contractors should make sure to remind their customers of this expense deduction for HVAC units.
b) Bonus depreciation provision: Businesses can claim additional depreciation for certain property in the first year of the recovery period. For property placed in service in 2015, 2016, and 2017, the bonus depreciation rate is 50 percent; the rate is 40 percent for 2018 and 30 percent for 2019.
Tax deadline changes
Filing deadlines will change so that flow-through entity return deadlines are before investor return deadlines. In addition, partnerships operating on a calendar year will have a new deadline of March 15, the same due date as S corporations. Calendar year based C Corporations will have a deadline of April 15. Click here to see the complete list of changes.
Expanded eligibility for Research and Development (R&D) tax credit
Until recently, most internal use software was not eligible for the R&D tax credit. Companies can now receive that credit as long as the software passes the three-part test, meaning the software must be highly innovative, involve significant economic risk, and be commercially unavailable for taxpayer use.
New partnership audit rules
Effective in 2018, partnerships may be liable at the entity rather than partner level for audit related tax collections. The changes will have a significant impact on how partnership interests are valued and transferred, and those involved should consult their tax advisors.
Pending estate planning changes
The IRS has proposed changes in how minority stakes in family-owned businesses are valued when owners transfer interests to the next generation during their lifetimes. Business owners considering ownership transfers should consult their tax advisors about taking advantage of current rules before these changes are finalized.
In addition to these changes, business leaders should pay attention to new tax laws that will likely take effect under President-elect Donald Trump.
For more information about LBMC, visit www.lbmc.com.
Publication date: 1/9/2017