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CA Governor Signed Law to Conform to Federal Tax Law Changes

The California governor signed law AB 91, also known as the “Loophole Closure and Small Business and Working Families Tax Relief Act of 2019” which partially conforms to certain provisions of the Federal Tax Cuts and Jobs Act, some of the significant items are as follows:

  • Small business accounting method reform and simplification
    • Allow businesses with average gross receipts less than $25 million to adopt the cash method of accounting
  • Net operating losses
    • Only allow net operating loss carryforwards

The new California law does not conform to:

  • Opportunity zone gain deferrals and capital gain exclusions
  • Fringe benefit federal deduction limitations
    • Convenience of employer meals
    • Entertainment
    • Parking and transportation

Although the law goes into effect for many of the provisions starting in 2019, certain provisions can be elected to apply to 2018.

To discuss how best to apply these changes to your situation, please contact a WFY tax expert at (949) 910-2727 or info@cpa-wfy.com.

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unified framework

Unified Framework for Tax Reform

Republican lawmakers released on Wednesday a “unified framework” for tax reform designed to cut tax rates, simplify the Internal Revenue Code, and provide a more competitive environment for business. The key changes are as follows:

Individuals:

  • Current tax rates: Seven brackets from 10% to 39.6%.
  • Proposed tax rates: Three brackets at 12%, 25% and 35%.
  • Current standard deduction: $6,350 individuals and $12,700 married filing joint.
  • Proposed standard deduction: $12,000 individuals and $24,000 married filing joint.
  • Elimination of personal exemptions, worth $4,050 per person.
  • Repeal of the alternative minimum tax.
  • Repeal of the estate and generation-skipping transfer tax.
  • Eliminate most itemized deductions, including state and local tax deductions (will keep mortgage interest and charitable contributions deduction).

Businesses:

  • Small and family-owned business and flow through entity tax rate reduction (Sole Proprietorships, Partnerships and S Corporations).
    • Current maximum tax rate 39.6%.
    • Proposed maximum tax rate 25%.
  • Current C Corporation tax rate 35%
  • Proposed C Corporation tax rate 20%.
  • Tax U.S. companies only on U.S. income instead of worldwide income.

There is tremendous opportunity this year to plan ahead and create permanent tax saving benefits by structuring a year-end tax plan that fits your situation.

Email us at info@cpa-wfy.com or contact us here discuss how to maximize your 2017 tax benefits from the proposed upcoming changes to “unified framework” for tax reform.