A successful business plan must account for a number of business practices, including tax planning. It is wise for entrepreneurs to revisit their business tax plan on a regular basis. However, this is particular true in 2018 due to recent tax law changes.
Will the new tax law impact business planning? In short, yes, the new tax law will likely impact tax planning for everyone — businesses included. Every business should review both general business impacts as well as those that will specifically impact their industry.
How will the changes impact the construction industry? Three specific considerations for construction companies include:
- Rate. The tax rate applied to the business may decrease, dependent on the type of business entity under which the company operates. Those that operate as a c-corp, for instance, were formerly taxed at 35 percent. The new law drops this rate to 21 percent. Pass-through entities may also experience a reduction, in part because of changes to the individual tax rates.
- Deductions. Some change, some stay the same. The deduction for domestic production activities (which was essentially a 9% deduction from construction net income), for example, was lost.
- Expenses. The expenses incurred by a construction company are often staggering. Construction equipment is extremely expensive. The new law allows for a 100 percent immediate expensing for new or qualified used equipment.
These are just a few of the tax implications that business owners should take into consideration when developing a business plan. Business tax obligations can be reduced in a number of ways. An attorney can review your business plan and provide suggestions to help better ensure you are making the most of available tax planning strategies.