Let’s Talk About Business Taxes for the 2018 tax year
C CORPORATION INCOME
- § Taxable income of a C corporation: taxed a flat
rate of 21%
SERVICE CORPORATION TAX
- § Taxable income of a qualified personal service
corporation is no longer subject to tax at a flat rate of 35%, but is taxed at
the regular corporate tax rate of 21%
- § 20% of accumulated taxable income (in addition
to regular corporate income tax)
- § 20% penalty on undistributed personal holding
- § No foreign tax credit allowed against personal
holding company tax.
- § Tax rate: 15.3% (12.4% OASDI tax plus 2.9%
- § Surtax: 0.9% Medicare surtax on self-employment
income in excess of $200,000 (single), $250,000 (married filing jointly), or
$125,000 (married filing separately).
- § Wage base: $128,400 of self-employment income
for OASDI (maximum OASDI tax of $15,921.60; no ceiling on Medicare tax).
SOCIAL SECURITY TAX
- § Tax rate: 7.65%, imposed on both employer and
employee (6.2% OASDI tax plus 1.45% Medicare tax).
- § Wage base: $128,400 of wages for OASDI (maximum
OASDI tax of $15,921.60; no ceiling on Medicare tax).
- § Tax rate: Employers pay 6% on first $7,000 of
wages paid to each employee.
- § Credit: Maximum amount of 5.4% for contributions
paid to state unemployment insurance funds.
- § Corporations owing $500 or more in income tax
for the tax year must make estimated tax payments equaling the lesser of 100%
of the prior-year or current-year tax liability. Large corporations must base
the last three payments on the current-year tax liability.
- § Due on the 15thday of the fourth,
sixth, ninth, and 12thmonths of the corporation’s tax year (April
15, June 15, Sept. 15, and Dec. 15 for calendar-year corporations).
MINIMUM TAX (AMT)
- § Starting in 2018, the AMT no longer applies to
- § Taxed on U.S.-source investment income at 30%
(or lower under treaty).
- § Net income effectively connected with a U.S.
trade or business taxed at regular U.S. tax rates.
- § Accumulated earnings tax of 20% of accumulated
- § Branch profits tax of 30% on dividend equivalent
- § 4% tax on U.S.-source gross transportation
income that is not effectively connected with a U.S. trade or business.
- § From 1120, U.S. Corporation Income Tax Return:
April 15 for calendar-year corporations (extension to Oct. 15 available (Form
7004, Application for Automatic Extension of time to File Certain Business
Income Tax, Information, and Other Returns)); 15thday of the fourth
month following the close of the corporation’s tax year for fiscal years ending
other than June 30 (six-month extension available); Sep. 15 for corporations
with a June 30 fiscal year end (extension to April 15, 2020, available).
- § Form 1065, U.S. Return of Partnership Income: 15thday of the third month following the close of partnership’s tax year (six-month
extension available (Form 7004)).
- § Form 1065, Schedule K-1, Partner’s Share of
Income, Deductions, Credits, etc.: Due to partners on or before the date the
partnership files Form 1065.
- § Form 1120S, U.S. Income Tax Return for an S
Corporation: 15thday of the third month following the close of the
corporation’s tax year (six-month extension available (Form 7004)).
- § Form 1120S, Schedule K-1, Shareholder’s Share of
Income, Deductions, Credits, etc.: Due to shareholders on or before the date
the S corporation files Form 1120S.
STANDARD MILEAGE RATE
- § For business use of auto: 54.5 cents per mile
(note that unreimbursed employee business expenses are no longer deductible as
a miscellaneous itemized deduction).
- § Deemed depreciation: 25 cent per mile
- § U.S. persons owning 10% or more of the stock (by
vote or value) of a controlled foreign corporation must include in currently
taxable income “global intangible low-taxed income” (GILTI), effective with the
CFC’s first tax year beginning after Dec. 31, 2017, regardless of whether any
amount is distributed to the shareholder.
- § Corporations may claim a deduction of 50% of
- § U.S. persons owning 10% or more of the stock (by
vote or value) of a “deferred foreign income corporation” must increase the
foreign corporation’s Subpart F income for the last tax year of the foreign
corporation that begins prior to Jan. 1, 2018, by an amount equal to its
“accumulated post-1986 deferred foreign income” Taxpayers generally may elect
to pay the tax resulting from the inclusion in eight annual installments.
FOREIGN DERIVED INTANGIBLE
- § Domestic corporation (other than regulated
investment companies and real estate investment trusts) can deduct 37.5% of the
corporation’s “foreign derived intangible income”.
- § Business interest deductions are limited to the
sum of (1) business interest income; (2) 30% of the taxpayer’s adjusted taxable
income for the tax year.
- § Any disallowed business interest deduction can
be carried forward indefinitely (with certain restriction for partnerships).
NET OPERATING LOSSES
- § Limited to 80% of taxable income.
- § Can be carried forward indefinitely; cannot be
carried back (except for farming business).
Business auto depreciation limits
For vehicles placed in service during 2018
Passenger automobiles with bonus depreciation
Trucks and vans
Trucks and vans with bonus
*$16,400 if acquired before Sept. 28, 2017
- § Limited to real property not primarily held for
TRAVEL PER-DIEM RATES
- § High-low method: $284 per day ($68 for meals)
through Sept. 30, $287 per day ($71 for meals) after Sept. 30, for high-cost
localities; $191 per day (57 for meals) through Sept. 30, $195 per day ($60 for
meals) after Sept. 30, for other localities in the continental United States
- § Transportation industry meals and incidentals:
$63 per day through Sept. 30, $66 per day after Sept. 30 (CONUS); $68 per day
through Sept. 30, $71 per day after Sept. 30 (outside CONUS)
SEC. 179 AND BONUS
- § Sec. 179 expense deduction: $1,000,000 with
$2,500,000 threshold limit.
- § Bonus Depreciation: 100% of the cost of eligible
property placed in service in 2018
- § From a domestic corporation: 50%.
- § From a corporation owned 20% or more: 65%.
- § From a member of an affiliated group filing a
separate return: 100%.
- § From a qualified 10%-owned foreign corporation:
50% of the U.S.-source portion; 100% of the foreign-source portion.
- § Built-in gains tax: Corporate tax rate times net
recognized built-in gain (imposed during the recognition period on S
corporation that were formerly C corporation).
- § Excess net passive income tax: Imposed if an S
corporation has accumulated earnings and profits at the end of the tax year and
its passive investment income exceeds 25% of the corporation’s gross receipts.
Corporate tax rate times excess net passive income.
- § LIFO recapture amount: excess (if any) of the
inventory amount under FIFO over the inventory amount under LIFO at the close
of the S corporation’s last C corporation tax year must be included in the
corporation’s gross income.