We are in interesting times, and the implementation of the Tax Cuts and Jobs Act was signed into law on December 22, 2017.
What does this mean for you? Is it beneficial or detrimental to your income and tax treatment? This is the time to consult with your tax professional to see how you will be affected.
Let’s take a look at what this means for truckers and trucking companies.
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Depreciation and Equipment Transactions
Writing off 100% of equipment acquired and placed in service after September 27, 2017 will be allowed under the newly revised bonus depreciation. This applies to both new and used property now, where bonus depreciation previously was only available for new equipment. Not all state jurisdictions allow this, so consult a tax professional about the new depreciation rules! This will begin to phase down 20% per year starting 2023, and scheduled to sunset at the end of 2026 (for now.)
Like-kind exchanges to defer gains on equipment sales – Soon these will be limited to real property transactions. This may just need some extra planning to take advantage of the 100% bonus depreciation allowance, since the like-kind exchanges are going away for equipment.
Per-Diem Programs
Company sponsored per-diem programs won’t be affected by the changes, but employee drivers of companies without programs in place will need to review their strategy on how to handle their previously self-reported 2% itemized deductions categorized as “per-diem.” The new law has suspended this 2% itemized deduction, and it’s possible that employee drivers without a program may face a tax increase.
Since the standard deduction has doubled, the impact may not be as bad as it looks, but each employee’s tax situation will be unique.
Tax Rates and Entity Choices
C Corporation tax rate: from 35% down to 21%
S Corporations and other pass-through entities: a new 20% deduction for domestic “qualified business income.”
Limitations are in place, but this is the general rule. Look into the different scenarios with your tax professional, and this may be a good time to make a change.
Whatever your situation may be, we are sure you still need to move your freight! Get in contact with one of our specialists at BOA Logistics.