Issue link: https://viewer.e-digitaledition.com/i/1004438
WE CANNOT SPEND TOO MUCH TiME TALKiNG TO OUR PHYSiCiAN CLiENTS ABOUT THE TA X CUTS AND JOBS ACT (TCJA) EFFECTiVE THiS YE AR. MANY iMPORTANT CHANGES MADE WiLL iMPACT ALL BUSiNESS OWNERS. IN THIS ARTICLE, I will touch on the qua lified business income (Q BI) deduction (available to sole proprietors, LLCs, partnerships and S corpora- tions) a nd some of the other cha nges made to routine annua l expenses incurred by a practice including depreciation, meals and entertainment, and business-use vehicles. With rega rd to the Q BI deduction, there a re three separate moving pieces to address. First, for married ta xpayers, the 20 percent deduction of qua lified ta xable income is a llowed for income generated by medical practices to the extent total income is $315,000 or less. A limited deduction is available on income up to $415,000 after which the Q BI deduction is completely disa llowed. Second, tota l income includes income from a ll sources for both spouses. For example, assume a physi- cian's share of ta xable profit from the practice is $200,000, physician wage income is $100,000 and the spouse's wage income is $125,000. The easy mista ke to ma ke is to a ssume the 20 percent Q BI deduction is a l lowed because t he physi- cia n's sha re of i ncome is $300,000, wh ich is under the $315,000 threshold. The tota l income earned by both spouses ($425,000 in my example) must be used to determine whether or not the Q BI deduction is a l lowed. So in this exa mple, no 20 percent deduction of the medica l income is a llowed. Third, only the physicia n's sha re of ta xable prof it from the practice, not the wa ge income, is considered for t he 20 percent Q BI deduction . Ta x pla n n i n g to get tot a l t a xable income just below $315,000 would be impor ta nt in this exa mple here. There a re benef icia l cha nges made under the TCJA rega rding the expensing of capita l expen- ditures ( purchases of furniture, equipment a nd qua lif ying leasehold improvements). Under prior ta x laws, capita l ex penditures made on bra nd new assets qua lif ied for a 50 percent accelerated "bonus" depreciation write-off. Effective Sept.27, 2017, capita l expenditures made on both new and Continuation of the New Tax Law BY CHRISTOPHER DAVIS, CPA 1 4 1 4❱❱❱❱❱ A C C O U N T i N G