We outlined some of the major provisions effecting a veterinary practice in our most recent blog post. Since then, our wise Washington leaders took it upon themselves to reinstate many of the tax credits and deductions that expired December 31, 2016, retroactive back to January 1, 2017. Yes, provisions that went by the wayside over a year ago!
Have you ever heard the saying “sometimes you have to go slower in order to go faster”? (If you’re a motorsports fan, I’m sure you have heard that at some point.) So be it with the recent tax law changes! Some things need your immediate attention, while others deserve more time for understanding and clarification.
Obviously, a few changes effect 2017 and will be addressed as you have your 2017 business and personal returns completed. Most notably, enhanced benefits and opportunities related to enhanced bonus depreciation and first-year expensing of equipment and property improvements. I’ll leave that for you and your tax advisors to utilize the new provisions in order to optimize your 2017 net income and the effects on future years.
Perhaps one of the biggest opportunities needing your immediate attention pertains to property utilization of your business accountable expense reimbursement plan. First, if you don’t have a written plan, get one immediately! Why? Any reimbursement made to any employee, including yourself, will be deemed taxable wages if not made according to your written accountable plan; meaning employees pay tax on the reimbursement and the employer must pay employer payroll taxes in addition. Furthermore, since there is no longer the ability to deduct “employee business expenses” on the personal return, there will be no offset available. Bottom line, if the “reimbursement” was paid according to a qualified written expense reimbursement plan there would be no tax or payroll taxes. Otherwise, everyone loses!
Perhaps the biggest provision getting attention that effects your practice is the new 20% pass-through deduction. In simple terms, most non C Corp business may be eligible for up to a 20% (of qualified business income) deduction. This is one of those go slower to go faster things! Although there are many flapping their gums over how to best maximize the deduction using mergers, business splits, and formation strategies, we caution making such major entity decisions based on the limited information contained within the tax bill itself. Hopefully, the next several months will provide direction and answers from the treasury in order to make a better-informed decision.
Stay tuned! We will address many more specifics in upcoming blogs.