The U.S. Senate narrowly passed its tax legislation for 2018 recently and the implications for small- and medium-sized businesses have yet to fully emerge.
Maritime tax experts offered some potential effects that same day, wrapping up the International WorkBoat Show with a tag team of out-loud thinking about what Congress may finally come up with.
One piece of advice they were fairly certain about: businesses should pay whatever now current tax deductible costs that they can before 2017 ends.
“This is a really important issue for you,” said Leon Rittenberg III, a tax lawyer with Baldwin Haspel Burke & Mayer LLC, New Orleans. One big ticket item for business owners: paying the last of their 2017 property taxes by New Year’s Eve.
That’s because deductions for local and state taxes are clearly on the chopping block, even if the House and Senate versions of tax legislation differ in degree.
“Entertainment expense will no longer be deductible,” said Rittenberg. If the goal is simplification of the tax code, that elimination is “probably good tax policy because we all know that’s a set of rules that get abused,” he added.
“If that’s 1% of your business expenses, and you save 1% on your taxes (with a revised tax code), it’s a wash,” said Rittenberg.
But eliminating other longstanding exemptions and deductions, such as interest expense or personal deduction for uninsured losses could be fraught for small business owners.
Amid the Senate’s hasty amendments and handwritten drafts that drew much scorn in news media reports, there’s the likelihood that lawmakers do not fully understand how the law will actually perform if a final version is signed by President Trump and turned loose.
One example Rittenberg cited is tax credit for rehabilitating historic properties.
“Some of these provisions may have been designed more to punish people who live in Democratic (voting) states, if you talk to people who follow these things,” said Rittenberg. “To me that’s really shortsighted.”
In fact, “these credits were really used by people in small towns – in New Orleans, in Jackson, in Natchez” to rebuild and revitalize older communities, he said.
“Who knows where that’s going to end up? We know there’s a lot of pushback on that,” said Rittenberg’s colleague, tax lawyer Andrew Sullivan.
Sullivan had opened the discussion by frankly noting the uncertainty: “What Leon’s saying is everything he’s going to say may change by the time we go out the door.”
The lawyers said business owners should be talking to their tax advisors as the potential changes take shape. Rittenberg also noted they should recognize there’s plenty of future uncertainty: “It’s important to remember nothing is permanent.”