In case you haven't been paying attention tax policy has changed and as someone who is making big decisions about your business
There are some surprises there for you some are good and some
You may not be as happy about mark Kohler is a CPA a business tax and legal adviser and the author of several books
The latest one is the business owners guide to financial freedom, so good to see you. Thanks for having me all right
You're going to break this down. I'll do my best is complex its complex ok
let's just get high level okay, at least the things we should go and talk to our accountants about well as
The biggest deduction that's coming through for business owners
And this is a big deal because the media is really focusing on the individual side and business owners
I think oh, it's just gonna follow the bottom. It is what it is, but there's some strategy
Well medium to to small business owners the pastor the pastor, ooh
Okay, ninety percent of the small to medium business owners are S corporations, or LLC's yeah
And the legislation didn't leave Main Street alone. This is good. We want something so we get this 20%
pass-through deduction so at the bottom line you get to deduct 20 percent of your
Profit as an expense so if you made a million dollars you get a $200,000 deduction. Yep sounds amazing you're saving taxes
Yeah now for the average
Business, that's maybe product or service base or restaurant construction company you're loving it good stuff
But then it takes a turn for the worst because if you're a personal service business. It's limited you start spaced out dentists
What's a personal? Yeah like dentists doctors engineers accountants actors actresses Agrotech? Yeah, you know what it's funny
You bring that architects?
Dodged the bullet. I don't know what it was but engineers get sucked in so it's personal service
And it's a broad definition as personal service it phases out if you're single and starting to make more than
150-thousand gone
Married it finally joint make three hundred thousand or more gone is that deduction we were hoping for you're missing out so that 20% deduction
Benefits some people some people. It's a wash
Yeah, you know at a certain point yeah at a certain point okay?
Then let's talk about some of the things that have disappeared so entertainment expenses
tell me where they were and now where they are I know and I feel like debbie downer today because it's just
Frustrating this entertainment expense taking people out and that's an important part of business
You know let's talk business over some golf a spa a theater show something like that baseball game
No longer right off at all entertainment expense is gone in some argue
It's gonna have an effect on the entertainment industry itself, but the cost of business just went up. You know
I'm gonna go out and still entertain I need to smooth my clients and now I don't even get a
deduction for half of that yeah, that's interesting
I I'm guessing that part of our audiences out there thinking it on their own side
I am kind of schmoozing clients right I'm taking them out places and now I'm not gonna be able to write that off
On the other half
There's probably people out there saying I am a client and I have been schmooze
Right and so I've been taken to these great shows and sporting events and no one's going to do that for me now
Yeah, I know. What's Vegas gonna
Do I mean this is a big deal so?
So entertainment expense is gone, and so business whores need to anticipate this think about the year
You know where what's my budget gonna be for this type of stuff
Do I need to rein in some of those corporate accounts the spending accounts for certain and this includes?
Everything so so yes of course the sporting events whatever the shows, but also I'm taking you just for dinner
or yes now that brings in meals because
Technically meals were part of this entertainment expense now all the accounts across the country are looking for loopholes
We're gonna
See how this play as it plays out because isn't dining really a marketing expense in a lot of ways, too
So we'll see but right now dining taking someone out to eat is also. No longer a write-off
Prospects clients employees going out to dinner not a write-off
Okay
you considered the other ones marketing expenses as all well you would think and that's
We're gonna. See this is where it gets complicated because it's all brand-new. Yeah the Devils in the details. Okay. Oh does really?
It excludes that expense now no no no there's a second piece to this meals and food in the office
Is still a write-off it used to be a hundred percent though you know donuts on Friday the cafeteria the?
Modern companies are trying to do because it's a benefit for their employees to get to hang out with each other and talk with each
Other yeah, yeah, it's a good one now. It's 50 percent so that all used to be a hundred percent right if no
That's 50 got it. So we used to get little now we're gonna be getting doughnuts
Yeah, you're just got a you'll get half the doughnut. You know it's a 50%. Cut you know got it
Okay, so these are just simply all things that we need to think about as we are budgeting throughout the year
What are we going to spend for entertainment for meals etc yes?
And there's a lot of strategy involved not only you're going to look at this
entertainment and meals expense
And where do I want to fall but on this pass-through see historically this S corporation?
Has been a great strategy of dividing your your w-2 wages from your k1 or pass-through income
Hey
It just got better because we really want to maximize that pass-through income
in save on the FICA on the payroll so S
Corporations are still as popular as ever you want to meet with your accountant look at my strategy for the year
What do I want to see in my pass-through and where's this deductions gonna fall for me? All right?
You've given us a lot to go to our accountants with
You're here for we're here for just just get the questions that you go into it alright well
Thank you so much so much a lot to digest here appreciate you coming in. Thanks for having me