We’ve all heard a lot about the potential impacts of the significant federal tax law changes made last year. Now we have more specific information about how it will impact our clients and we are happy to share that with you.
There’s no doubt the Tax Cuts and Jobs Act (TCJA) offers businesses and plan participants tax savings. These tax benefits vary based upon the business taxable entity and the participant’s individual tax circumstances.
Here are some highlights:
• Business owners with a C Corporation will benefit from the reduced corporate flat tax of 21%. This will enhance the value of non-qualified deferred compensation retirement plans.
• Businesses with a “pass-through” entity for tax purposes, such as S Corporation, partnerships or sole proprietors, will need to analyze the impact of the new 20% qualified business income deduction and the role the qualified retirement plan contributions can play to maximize utilization of this deduction.
• Plan participants will now have a larger single and married standard taxpayer deduction. This may encourage utilization of Roth deferral if the participant drops into the 12% marginal tax rate. In addition, loan pay-off at termination of employment had a long-standing tax implication for participants due to the 60-day loan repayment requirement. With the TCJA, participants can now have until the filing of their federal income tax return on April 15th (or later with extension) following the year of termination of employment to pay off their outstanding loan balance.
At Benefits Administrators, we always stay on top of changes like these so we can provide a consultative approach to serving your business, tax situation and employee needs. The complexity of the new tax rules can be challenging but we will design and service the best retirement plan to suit your company’s specific goals and situation.