Navigating Tax Law Changes: How a CPA Catches the Nuances and Uses Them for Your Benefit

There’s no denying that changes to tax law, whether big or small, make it harder to understand how they impact your personal life and your business. Tax law is full of indirect language, A/B options, and scenarios that may or may not apply to your business or personal income structure. Plus there’s the issue of the SALT deductions being lowered which could impact you negatively. If you’re a Charlotte, NC, business owner with a sole proprietorship or a corporation, you benefit from a flat corporate tax rate among other changes in the law that favor business owners. It’s for these reasons and more than a Charlotte NC business accountant makes for a good ally in your attempt to legally lower your tax liabilities.

Tracking the Changes for Business Taxes

The flat tax for corporations is fairly straightforward: all corporations are taxed at the same rate of 21 percent. But what is not so straightforward is the deduction for pass-through business entities. If you’re an S-corporation, partnership, or a sole proprietor, you may be able to take up to 20 percent deduction of qualified business income. Confusing? Absolutely. You now need to determine what defines qualified business income and how much of it you can deduct. This is where a Charlotte NC business accountant comes to your rescue. Pass-through entities use personal income tax rates and marriage status comes into play and the law becomes even more complex. If you don’t understand how this works, you could get into trouble for improperly using the deduction. A CPA navigates the complexities, determines what’s qualified, what’s not, and makes sure you won’t get into trouble.

If you were in the habit of deducting things like entertainment expenses and interest paid on business loans, you’ll find it much harder to do so going forward. In fact, entertainment expenses for showing clients a good time are no longer deductible although there are some entertainment expenses that still qualify for a deduction. And if you were running your business with debt financing to take the tax break, you’ll find it’s not such a good idea any longer. You’ll need to talk to your Charlotte NC business accountant about restructuring your debt/equity ratio and avoid the extra costs you’ll incur now that the deduction has been eliminated.

Getting the Most Out of the Tax Changes for Personal Returns

If you’re operating a pass-through corporation, your profits are reported as personal income. This is done so you can take advantage of lower tax rates on personal income instead of paying out at corporate rates. And it’s still an attractive option for saving on taxes even with the change to a flat income tax rate for businesses. There’s also the option to itemize your deductions and reduce your income to get into a lower tax bracket or simply lower your overall tax liability.

Changes to personal income taxes such as the State and Local Tax (SALT) deduction means you may not be able to deduct as much of your SALT as you once did. Now you can only deduct up to $10,000 in state and local property taxes. If you have your Charlotte NC business accountant handling your personal tax returns as well as your business returns, you’ll get a better result than if you used software alone. An accountant can find other deductions that make up for the loss of SALT and other personal deductions that help you pay less in taxes if you owe or get a larger refund if you overpaid.

A CPA has to learn tax law in order to apply it properly to a variety of income structures. She also has to recognize when certain types of income or expenditures trigger an additional deduction or credit and apply them accordingly. This is all to save you money, keep you out of trouble, and even increase a refund if it’s owed.