Florida Sales Tax Update
As a reminder, effective January 1, 2018, Florida sales tax on all commercial rents has been reduced from 6% to 5.8%. See Fla. Stat. § 212.031(1)(c). This rate is effective at the time the tenant occupies, uses, or is entitled to use the real property. This reduction, although minor, will result in tax savings for most commercial tenants. Commercial landlords should review their lease agreements and ensure they account for this change.
DOL Overtime Rule Update
On August 31, 2017, a federal judge in Texas struck down the Obama era Department of Labor (DOL) Overtime Rule which raised the salary exemption from overtime from $23,600 to $47,745 annually. Subsequently, the Department of Labor dismissed its appeal and ended the litigation, effectively putting an end to the Obama administration’s DOL rule change. As of now, the old rules still apply, with the salary exemption from overtime being applicable to employees paid over $23,600. If you have concerns regarding your company’s compliance, we suggest seeking out the assistance of an employment attorney. If you need any help calculating employee’s pay levels, please feel free to contact our office.
Federal Tax Reform Update
On Wednesday, the Trump administration and the Congressional tax writing committees released the “Unified Framework for Fixing Our Broken Tax Code”. Although this framework lacks the essential details we need, it provides a general idea of what the legislation will look like.
The below proposals should be taken with a “grain-of-salt”. While the changes lay out what the tax committee’s goals are, the actual tax effects will be shown in the actual legislation. Once the legislation is introduced, it will likely be watered down before there is even a chance the bill is passed. (Remember health care reform?) As always, we will do our best to keep you up-to-date on any changes
The following pages include a summary of the highlights of the “Unified Framework for Fixing Our Broken Tax Code”.
|Standard Deductions and Exemptions||Standard deductions are increased (Married: $24,000, Single: $12,000), but exemptions are removed.
|This will limit individuals who are eligible to itemize deductions and push most people into taking the standard deduction. Overall, however, it should reduce taxes for most and simplify the code, but this benefit is limited due to the removal of the standard exemptions|
|Tax Brackets||7 Tax Brackets reduced to 3:
|This lowers the highest bracket from 39.6% to 35% and raises the lowest bracket from 10% to 12%. The exact effects of these changes are unknown until the taxable income bracket levels are released, but most lower income individuals should see a tax cut, due to the increased standard deduction. Higher income earners should also see a small tax cut of 4.6%.
|Child & Dependent Tax Credit||$1,000 refundable credit, phased out at a higher income level for children.
$500 nonrefundable credit for parents or other non-child dependents.
|While the $1,000 credit does not change, more taxpayers should be eligible.
The $500 credit will beneficial for individuals who take care of their parents.
|Alternative Minimum Tax||Repealed.||This drastically simplifies the tax code.|
|Itemized Deductions||Most eliminated, but mortgage interest and charitable contributions are retained.||This will drastically cut down on individuals who are eligible to itemize deductions, as state taxes, medical expenses, and other itemized deductions appear to be repealed. Although simplifying the code, this may increase taxes for some.|
|Estate Tax and Generation Skipping Tax (GST)||Repealed.||The details on how the estate tax is repealed are important, as it is unclear (1) if the gift tax will also repealed, (2) if the estate tax regime will be replaced with another tax, and (3) the effects on the income tax provisions.|
|Pass-Through Income Rates||Small business taxed as partnerships, sole-proprietorships, or s corporations will receive a maximum 25% pass-through rate, but “recharacterization” of personal income from wealthy individuals will be prevented.||The exact details are needed to determine the exact effects of this change, but likely beneficial for most small business owners. The reference towards “recharacterization” point towards rumors of service partnerships and corporations being exempted from this special rate.|
|C Corporation Rates||Maximum Rate cut to 20%||For most corporations this will likely equate to a tax cut.|
|Corporate AMT||Corporate AMT is repealed.||The repeal of the AMT drastically simplifies the tax code.|
|C Corporation Interest Expense||Interest expense on c corporations will be subject to some limitation.||Heavily financed c corporations will likely experience some type of a tax raise via the partial elimination of the interest expense deduction.|
|Expensing of Capital Investments||Business will immediately be able to write off fixed assets, other than real estate and other structures.||There will surely be limitations applied to this expensing and this policy appears to echo the current Section 179 regime.|
|Domestic Production Activities Deduction||Eliminated.||Qualified producers will lose this deduction
|Business Credits||Research & Development Credit and the Low-Income Housing Credit. Other business credits, which are unnamed at this time, may be repealed.||More information is needed as to exactly which credits will be eliminated, but Taxpayer’s who receive Worker’s Opportunity Tax Credits or other tax credits may lose their credits.|