Spring 2018 issue of Horizons

Adjusted taxable income is calculated as taxable income before deductions for interest expense, net operating losses, depreciation, taxes and amortization expense. The amount of interest expense that is limited is carried forward indefinitely and the disallowance is regarded at the filer level, not at the taxpayer level for partnerships. Individual Tax Changes Many changes to individual income taxes will impact owners of construction firms set up as pass-through entities. The changes are set to begin in 2018, with many being only temporary and set to expire in 2025.

∙ The schedule A state and local tax itemized deduction is capped at $10,000 ∙ Excess business losses from a flow-through entity are limited to a deduction of $250,000 or $500,000 for single and joint filers, respectively (taxpayers must also consider their tax basis, at risk and passive activity loss rules when computing the deduction) ∙ Repeal of the 2% miscellaneous itemized deduction Many of the tax legislation changes require further clarification from the IRS through final regulations, rules and procedures. Ultimately, this may take months or years. The overall impact on the construction industry will take years to determine. Careful planning and discussions with your tax advisor should be performed in 2018 and future years to ensure you are maximizing the benefits of the new tax rules. ∙ Repeal of the 9% domestic production activities deduction

A short list of the individual tax changes include:

∙ Highest individual income tax rate dropped from 39.6% to 37%

∙ AMT was retained but the exemption amounts and phase-out thresholds were increased ∙ Standard deduction increased to $12,000 and $24,00 for single and joint filers, respectively, and personal exemptions are eliminated

CONSTRUCTION SERVICES GROUP

RubinBrown provides services to general contractors, specialty subcontractors and related companies in the construction industry. For more information, visit www.RubinBrown.com/Construction .

Ken Van Bree, CPA, CGMA Partner-In-Charge Construction Services Group 314.290.3429 ken.van.bree@rubinbrown.com

Mark Jansen, CPA, CGMA Partner & Vice Chair Construction Services Group 314.290.3208 mark.jansen@rubinbrown.com

Matt Beerbower, CPA Partner & Vice Chair Construction Services Group 303.952.1252 matt.beerbower@rubinbrown.com

Tim Kendrick, CPA Manager Construction Services Group 314.290.3431 tim.kendrick@rubinbrown.com

Spring 2018

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