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San Jose business tax deduction attorneyHistorically, business owners have been able to utilize tax deductions based on the cost of assets bought for business use and the depreciation of those assets. However, the recent Tax Cuts and Jobs Act (TCJA) modified the rules regarding the deduction of expenses under Section 179(a) and the deduction of depreciation under Section 168(g). These changes affect business taxes filed for years 2018 and beyond.

Section 179(a): Business Asset Deductions

This law permits businesses to deduct the purchase price of certain assets as an expense for the year the business begins to use the property. The recent updates to the law raised the maximum expense deduction to $1 million (up from $500,000). The updated law also raised the phase-out limit to $2.5 million (up from $2 million).

This deduction is available for tangible property like tools and technology used in business. The deduction is also available for qualified real property. Under the TCJA, qualified real property includes qualified improvement property, as well as certain types of improvements to nonresidential property, which includes: 

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San Jose small business payroll tax lawyerCalifornia employers are responsible for withholding payroll taxes, filing returns, and paying state and federal payroll taxes. The laws governing payroll taxes are complex, and as your small business grows, the onerousness of compliance with these tax rules will intensify.

What Are Payroll Taxes?

California has four state payroll taxes. Two are paid by the employer: Unemployment Insurance (UI) and Employment Training Tax (ETT). Two are withheld from workers’ wages: State Disability Insurance (SDI) and Personal Income Tax (PIT). Payroll taxes are administered by the Employment Development Department (EDD).

In addition, employers must handle federal payroll taxes. A small business will be required to pay federal taxes for Medicare, Social Security, and unemployment (FUTA). Also, an employer withholds federal personal income taxes, Medicare, and Social Security from workers’ wages.

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San Jose, CA small business tax credit lawyerThe federal Tax Cuts and Jobs Act of 2017 has brought sweeping changes to many areas of tax law. One change that might have been overlooked by businesses is that employers are now eligible for a tax credit if they offer certain kinds of paid family and medical leave to full and part-time workers. If you act before the end of this year, you may be able to qualify for this tax credit.

Qualifying for Tax Credits

Eligible businesses that enact qualifying paid family leave programs or amend existing ones by the end of this year will be able to claim the employer credit. This tax credit will be available for tax years 2018 and 2019. The credit is retroactive to the beginning of the business’ 2018 tax year for qualifying leave already given.

To qualify for the tax credit, employers must meet the following requirements:

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San Jose business tax lawyer, small businesses, tax cuts and jobs act, tax deductions, pass-through incomeThe United States Congress passed a major tax reform bill in December 2017, and lawmakers stated that one of their top priorities was to help grow the country’s economy by alleviating the tax burden on small businesses. While the full effect of the Tax Cuts and Jobs Act of 2017 has yet to be felt, the reform bill contained a number of provisions that will affect the taxes which small businesses pay. Therefore, small business owners should take steps to understand how to make the most of these changes.

Tax Deductions for Pass-Through Businesses

Pass-through companies, in which income is taxed at the rate of the individual business owner rather than through the corporate tax structure, account for 95 percent of businesses in the United States and include sole proprietorships, partnerships, and S corporations. Under the new tax law, pass-through businesses can take a 20 percent deduction on their taxable income, providing them with some financial relief and allowing them to reinvest these tax savings to grow their business. The deduction is subject to several limitations based on the type of business, its financial condition, and the taxpayer’s income.

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