We’ve now had a year to learn the provisions of the Tax Cuts and Jobs Act (TCJA) passed in December 2017 and how they affect taxpayers.  One of the changes with the biggest impacts is the reduction of the corporate income tax rate from a maximum 35% to a flat 21%.  Another is the 20% deduction for individuals for Qualified Business Income or “QBI”.  With the drastic reduction in corporate rates, and a less dramatic change in the top individual rate from 39.6% to 37%, many business owners are reconsidering their choice of entity for tax reporting purposes, specifically, whether it is better to be taxed as a passthrough entity or a C corporation.  Because of the relatively short window for doing the analysis and the lack of guidance available last year for making the change for 2018, a lot of taxpayers decided to postpone the decision until more guidance was available.  Calendar year S corporations and LLCs taxed as partnerships or as disregarded entities now have until March 15, 2019 to change to a C corporation effective January 1, 2019. Following are considerations for business entities owned primarily by individuals.

For more information, please contact Tax Partner, Roger Wilkins.

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