Repeal of Like-Kind Exchanges Except for Real Property
Other New Federal Tax Changes
For an in-depth look, read “Revenue Recognition Rule Changes Under TCJA.”
For more details, read “Other Federal Tax Reform Changes.”
Beginning January 1, 2026, the deduction for employer-provided meals for convenience will be 0 percent. It is important to immediately start separating your meal and entertainment expenses into the proper categories — 100-percent, 50-percent, 0-percent deductibility — to better calculate the proper deduction when you file your tax return.
3. 100% Bonus Depreciation
Read the following article for more details “Tax Reform Under the Radar – Qualified Opportunity Zones.”
14. Executive Compensation
For an in-depth look, read “IRS announces new mileage reimbursement rates.”
Opportunity Zones
11. Research and Development Expenses
For more information, read “Small Business Accounting Method Changes Under TCJA.”
Standard Mileage Rate
There are numerous changes that employers must make to their processes and accounting in the areas of income tax withholding, family and medical leave (FMLA) and moving expenses, among others. Consider modifying paid-leave policies, due to FMLA changes. If eligible employees are paid on FMLA-related absences, employers could qualify for a tax credit. Employer paid moving expenses are taxable income to the employee, except for military.
Tennessee Franchise
and Excise Tax
8. Small Business Accounting Method Changes
Legal Notice: LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.
Entertainment/Meal Expenses and Fringe Benefits
6. Entertainment/Meal Expenses and Fringe Benefits
Read the following article for more details “Limitation on Business Interest Expense Deduction under TCJA.”
15. Federal Repeal of Domestic Production Deduction (Section 199)
Executive Compensation
Individual Tax Changes
Download the Tax Planning Guide for Individuals.
Additional information can be found here “Cost Segregation Studies to Accelerate Depreciation Deductions.”
10. Tennessee Franchise and Excise Tax
For an in-depth look, read “Bonus Confusion in New Tax Law.”
7. Opportunity Zones
9. Revenue Recognition Rule
Phone: 615-377-4600
Email: info@lbmc.com
Limitation on Business Interest Expense Deduction
Small Business Accounting Method Changes
15. Federal Repeal of Domestic Production Deduction (Section 199)
Cost Segregation -
Section 179 Deduction
Research and
Development Expenses
Learn more about our business tax services.
4. Cost Segregation - Section 179 Deduction
LBMC is the largest professional service solutions provider based in Tennessee, serving nearly 10,000 clients with diverse needs across a spectrum of industries.
17. Individual Tax Changes
12. Employer Credits on Employee Benefits
13. Standard Mileage Rate
5. Repeal of Like-Kind Exchanges Except for Real Property
2. Limitation on Business Interest Expense Deduction
Revenue Recognition Rule
16. Other New Federal Tax Changes
For more details, read “Section 162(m) Guidance on Executive Compensation After TCJA.”
Federal tax reform creates a new 20% deduction for individuals, trusts and estates (noncorporate taxpayers) to take from qualified business income from partnerships, S corporations and sole proprietorships. According to the federal tax law, each business passes through the allocable share of income or loss to the partners or shareholders. Then the individual partner or shareholder calculates the 20% deduction separately for each trade or business.
There are many other federal provisions that have changed and may impact your specific situation. This guide is an overview to provide insight into some of the main provisions. Please consult your LBMC tax advisor for more details. He or she can help you identify which changes affect you and the best strategies for maximizing the new tax law’s benefits and minimizing any negative tax ramifications.
Learn more and download a reference chart here “Meals and Entertainment Deductions.”
The Section 199 deduction (also known as U.S. production activities deduction, the domestic manufacturing deduction and domestic production activities deduction) can no longer be taken due to the new tax reform. Numerous business tax preferences were eliminated under the TCJA. This included the Code Section 199 domestic production activities deduction.
1. 20% Deduction for Pass-Through Entities
For more details, read “How federal tax reform is going to affect Tennessee.”
12. Employer Credits on Employee Benefits
For more information, read “Section 1031 Like-Kind Exchanges Post Tax Reform.”
Read the following article for more details “Research and Development Expenses/Credit Changes Under TCJA.”
100% Bonus Depreciation
13. Standard Mileage Rate
5. Repeal of Like-Kind Exchanges Except for Real Property
Federal tax reform generally caps the deduction for net interest expenses at 30 percent of adjusted taxable income (ATI) for businesses with average annual gross receipts more than $25 million. Exceptions exist for small businesses, including an exemption for businesses with average gross receipts of $25 million or less. This limitation applies to interest paid to related and unrelated parties
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For more details, read “New Regulations on 20 Percent Deduction for Pass-Through Businesses.”
For more information on this topic, read “Maximize Your Firms Section 199 Deductions.”
7. Opportunity Zones
9. Revenue Recognition Rule
3. 100% Bonus Depreciation
16. Other New Federal Tax Changes
Federal tax reform allows full (100 percent) expensing of short-lived capital investments, such as machinery and equipment, for five years, then a 20-percent phase-down schedule over the subsequent five. The write-off is allowed for qualified property placed in service after September 27, 2017 and before January 1, 2023 (January 1, 2024, for longer production period property and certain aircraft). Federal tax reform also eliminated the original use requirement, and allows taxpayers to elect to apply 50% expensing for the first tax year ending after September 27, 2017.
11. Research and Development Expenses
Federal tax reform raises the Section 179 small business expensing cap to $1 million with a phaseout starting at $2.5 million. It also expands the definition of “qualified property” to include certain depreciable personal property used to furnish lodging, and improvements to nonresidential real property (such as roofs, heating, and property protection systems).
LBMC would welcome the opportunity to help you minimize your tax liability. Please contact us to talk about ways to put these and other strategies to work for you.
The TCJA makes small reductions to income tax rates for most individual tax brackets, including reducing the top rate from 39.6% to 37%. It also provides a large new tax deduction for owners of pass-through entities and significantly increases exemptions for the individual alternative minimum tax (AMT) and the estate tax. LBMC has developed a separate guide specifically for individual taxpayers.
8. Small Business Accounting Method Changes
Employer Credits on
Employee Benefits
Contributions to Capital (IRC. Sec. 118)
Related Party Interest and Intangible Expenses
Dividends Received Deduction
Foreign Dividends and Foreign Tax Credit
International Income - Deemed Repatriation
Federal Net Operating Loss (NOL) Changes
6. Entertainment/Meal Expenses and Fringe Benefits
2. Limitation on Business Interest Expense Deduction
Federal tax reform contains a provision that ties revenue recognition for book purposes to income reporting for tax purposes, for tax years starting in 2018. This law could have a major impact on industries dealing with contracts, especially as companies implement the updated revenue recognition standard under U.S. Generally Accepted Accounting Principles (GAAP). This accounting rule will cause some companies with complex, long-term contracts to recognize revenue earlier than in the past.
16. Other New Federal Tax Changes
The Opportunity Zones program is a new tax incentive introduced to the tax code in Section 1400Z to foster economic investment in distressed communities. The tax incentive centers on investments in QOZs, which are low-income census tracks nominated by States and then reviewed, certified, and designated by the Department of Treasury.
Federal Business Tax Planning Guide
Small businesses can now receive accounting-related relief by using the simpler and more-flexible cash method. Small business taxpayers with average annual gross receipts of $25 million or less in the prior three-year period are eligible to use the cash method of accounting. The cash method is allowed even if the purchase, production or sale of merchandise is an income-producing factor for these taxpayers. These changes could prompt more companies to opt for the simpler, tax-deferred cash method for both financial reporting and tax purposes.
4. Cost Segregation - Section 179 Deduction
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10. Tennessee Franchise and Excise Tax
13. Standard Mileage Rate
The business standard mileage rate cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026.
2. Limitation on Business Interest Expense Deduction
6. Entertainment/Meal Expenses and Fringe Benefits
20% Deduction for Pass-Through Entities
For businesses, the Tax Cuts and Jobs Act (TCJA) was the most massive tax law change since 1986, and there’s a lot to take in. There are numerous changes that employers must make to their processes and accounting in the areas of income tax withholding, family and medical leave, moving expenses and entertainment deductions, among others.
Under the new tax law, there are fewer deductions available for entertainment and meal expenses. Businesses can no longer deduct entertainment expenses. However, expenses incurred for recreational or social activities primarily for the benefit of employees are still fully deductible. Meals provided to employees who are traveling are still 50% deductible. It is important to immediately start separating your meal and entertainment expenses into categories (100%, 50%, 0% deductibility) to better calculate the proper deduction.
The signing of the TCJA repealed two notable exceptions to the deduction limit, including the exception for performance-based pay (including stock options) and the exception for commission-based pay, and placed a limit on the amount a company can deduct for executive compensation at $1 million dollars for a company’s CEO, CFO, and other highly paid executives.
15. Federal Repeal of Domestic Production Deduction (Section 199)
10. Tennessee Franchise and Excise Tax
Federal Repeal of Domestic Production Deduction (Section 199)
17. Individual Tax Changes
Starting with costs paid or incurred after December 21, 2021, federal tax reform requires domestic research expenses to be amortized over 5 years and foreign research expenses to be amortized over 15 years.
5. Repeal of Like-Kind Exchanges Except for Real Property
The TCJA didn’t eliminate like-kind exchanges and still generally allows tax-deferred like-kind exchanges of business and investment real estate. However, the TCJA eliminated tax-deferred like-kind exchange treatment for exchanges of personal property that includes everything from equipment, cars, trucks, etc., after December 31, 2017. Prior-law rules that allow like-kind exchanges of personal property only apply if part of the exchange was completed by December 31, 2017, even when part of the exchange remained open on that date. Overall the Section 1031 exchange rules have not changed since 1984.
For more information, read “Top 4 things employers need to know about the changes from the new tax law.”
9. Revenue Recognition Rule
14. Executive Compensation
Changes made to federal taxable income generally also mean changes to Tennessee taxable income. As a “rolling” conformity state, Tennessee automatically conforms to the latest version of the Internal Revenue Code. However, like other “rolling” conformity states, Tennessee may “decouple” from certain provisions it doesn’t wish to follow.
1. 20% Deduction for Pass-Through Entities
4. Cost Segregation - Section 179 Deduction
14. Executive Compensation
1. 20% Deduction for Pass-Through Entities
7. Opportunity Zones
8. Small Business Accounting Method Changes
11. Research and Development Expenses
12. Employer Credits on Employee Benefits
16. Other New Federal Tax Changes
www.lbmc.com | 615-377-4600 | info@lbmc.com
3. 100% Bonus Depreciation
Learn more about our business tax services.
