By staff writer
As the 2019 tax season approaches its end, tax filers will see the effects of the 2017 Tax Cuts and Jobs Act (TCJA) for the first time. While some say it has had a mixed effect, most of the experts who spoke with our team at Invest: Orlando affirm that the legislation has been overwhelmingly positive for businesses in the Greater Orlando area.
The TCJA changed deductions, depreciation, expensing, tax credits and other tax items that affect businesses. This has been the most significant federal tax reform enacted in the United States in decades. The TJCA had four goals: tax relief for middle-income families, simplification for individuals, economic growth and repatriation of overseas income.
“The 2018 Tax Cuts and Jobs Act has made people consider the type of entity they want to be,” Jed Grennan, founding partner of Grennan Fender CPA & Advisors, told Invest:. “Pass-through entities like S-corporations and partnerships in many cases now enjoy a 20 percent business income deduction.”
There has also been a reduction in overall tax liabilities across the firm’s client base, and most individuals and businesses are benefiting from the lower tax rates, the higher standard deduction and the higher child credit. “A lot of people don’t know how the new law benefits them until they sit down with us,” Gennan said. “In most cases, it is well received, and I think it has been a boost in the economy.”
Although one of the objectives of the TJCA was simplification, most people are not finding the changes to be simple. “On the business side, the big thing is the new qualified business income (QBI) tax deduction,” Charles Marcussen, managing partner of Newman, Seland & Oppenheimer, LLC, told Invest:. “There are other open-ended questions because they’re still writing the regulations on how that will be implemented. There are certain segments, like the service industry, that are still awaiting final regulations.”
The new tax law also includes complex provisions related to the QBI deduction, like limitations for special service organizations that will affect professionals such as doctors, lawyers, engineers and accountants. Dalia Cantor, CEO of CPA Solutions, explained that the tax reform — particularly where it concerns changes in business taxation — will benefit the majority of organizations.
“C-corporations will see a decrease in income tax rate from 35 percent to 21 percent, and pass-through entities such as S-corporations and partnerships will be able to take advantage of the 20 percent QBI deduction,” Cantor told Invest:.
On the other side, some firms such as Holland & Knight saw strong demand in mergers and acquisitions transactions in 2018, which Glenn Adams, the firm’s executive partner in Orlando, believes is a result of the tax reform. “It was a good time for organizations that had been on the sidelines in earlier years with respect to M&A activity to make investments in target companies,” Adams said.
As a result of these changes in tax legislation, Cantor told Invest: that tax planning will have to be proactive and more precise to make sure every business optimizes tax savings to its maximum potential. As this year’s tax season comes to a close, Invest: Orlando will be keeping an eye on the impact of these new tax regulations for local corporations and small businesses.
For more information on our interviewees, visit their websites:
Grennan Fender & CPA Advisors: https://orlandoaccounting.com/
Newman, Seland & Oppenheimer, LLC: https://orlando-accounting.com/
CPA Solutions: https://www.mycpasolutions.com/
Holland & Knight: https://www.hklaw.com/