The new tax law

[jainen]

The new tax law neatly resolves a problem we have talked about on this forum. Spouses working together don't need to file as a partnership, even in non community property states. They would use two Schedule C's, each reporting their respective shares of income and expense.

I'll be interested in what they say about this in my California update class. It seems community property laws would only permit a 50/50 split, with perhaps a different allocation for SE tax.

[George Boutwell]

It seems community property laws would only permit a 50/50 split, with perhaps a different allocation for SE tax.

Community property laws can always be disregarded with a written agreement, properly written and executed, pre or post nuptial. Spouses who co-own a business should make the effort to work out such details.

[JoshinNC]

I'm more interested in the at risk youth credit

The new law expands the eligible ages for the credit from 18 to 25 to 18 to 40! That was the one thing that jumped off the page at me.

I also like the change to Section 179 limits, midyear. Time to revisit the Q1 estimates we did for our business owners and revise them for the remainder of the year (more billable hours for me!).

[Bees Knees]

I also like the change to Section 179 limits, midyear. Time to revisit the Q1 estimates we did for our business owners and revise them for the remainder of the year (more billable hours for me!).

Going from a $112,000 limit to a $125,000 limit is going to matter?

[JoshinNC]

For a taxpayer in the 35% bracket

Going from a $112,000 limit to a $125,000 limit is going to matter?

that's a tax difference of $8050. So yes, I would say it would matter.

[Corduroy Frog]

Whoa Josh!

If you're correct, I'm missing something. If so, please tell me the error of my ways.

A differential of $13,000 taken in s.179 versus $2600 available under MACRS (assuming five yr. DD HY convention). Difference in taxable income, $10,400.@ 35% is $3,640. That's a difference of $910 for the Q1 estimate.

Not only that but this would apply only to a client whose capital expenditures exceed $112,000, capital expenditures under the new limit, and whose business is operating at a profit. If you have clients that this really helps, I apologize.

What am I missing?

[JoshinNC]

You are correct.

If you're correct, I'm missing something. If so, please tell me the error of my ways.

A differential of $13,000 taken in s.179 versus $2600 available under MACRS (assuming five yr. DD HY convention). Difference in taxable income, $10,400.@ 35% is $3,640. That's a difference of $910 for the Q1 estimate.

Not only that but this would apply only to a client whose capital expenditures exceed $112,000, capital expenditures under the new limit, and whose business is operating at a profit. If you have clients that this really helps, I apologize.

What am I missing?

I didn't take into account the fact that they would have been able to already depreciate the item. And yes, I do have clients who have that size cap expenditure, are operating at a profit, and yes it benefits them.

Thanks for pointing out my error, though.