With a bold and improbably large marker, President Trump recently signed the GOP tax bill into law. The Tax Cuts and Jobs Act is the largest one-time reduction of the corporate tax rate in United States history. With most of the sweeping tax changes going into effect on January 1, 2018, corporations will find their taxes significantly cut.
The 3 largest changes for business
In a sweeping bill of this size, it may be difficult break down the new laws. Recently, a professor of finance at Harvard Business School explained what the laws could do for businesses:
- Corporate tax rate: The law took the rate from 35 percent down to 21 percent. The argument has been made that the lowered tax rate will help keep companies from moving outside the U.S. or possibly convince them to move here. The upshot is that more jobs would then be created here. Also, global firms may find that the U.S. a potentially more attractive investment destination.
- Income earned abroad: The bill takes currently untaxed profits of U.S. companies being stored abroad—profits that had been taxed at a 35 percent rate after being brought back to the U.S.—and tax them at a one-time tax rate of 15.5 percent for cash and 8 percent for earnings reinvested into buildings or equipment.
- Business structures: To take advantage of the tax changes, individuals will try to become corporations, while some individuals who were employees will become contractors to take advantage of the pass-through entity 20 percent tax deduction.
With the new tax laws in place, having an experienced business attorney to consult with can directly impact the future of your company. After all, it has been said that a good business attorney is worth his or her weight in widgets.