1. The law creates a single corporate tax rate of 21% and eliminates the special tax rate for personal service corporation and corporate alternative minimum tax beginning in 2018.
2. IRC §179 expensing and bonus depreciation are increased.
3. Deductible business interest is reduced. The net interest deduction is limited to 30% of business “adjusted taxable income”. Small businesses (defined as those with average gross receipts of $25 million or less) are exempt from the limitation. Real property trade or business, including rental properties, may be exempt from this limitation by making an election.
4. A deduction is allowed for qualified business income for passthrough entity owners. The law creates a 20% deduction (IRC §199A) for pass-through income. This deduction is taken on the owners’ personal return. This deduction may be phased down based on taxable income computed without regard to the IRC §199A deduction but without reduction for capital gains.

   The effect of the phase-out depends on whether the business income is:

1. From specified service businesses – includes any trade or business “described in section 1202(e)(3)(A) (e.g. law, accounting, actuarial, healthcare, performing arts, etc. but specifically exempts engineering and architecture). This also includes services in investing, investment management, trading, or dealing with securities.
2. From all other businesses.

This section of the tax reform is complex. If you are interested with more information, please contact us.

- We are CPAs, tax accountants, tax preparers, business managers and consultants based in Torrance, CA near Los Angeles & OC, serving the entire U.S. See us at Yelp & Facebook. Call us (424) 278-4838 or e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it. .