MiamiHerald / Tech companies in South Florida can benefit from the Tax Cuts and Jobs Act (“TCJA”), as long as they proactively plan for the new tax changes. Otherwise, opportunities to maximize tax savings could quickly morph into more expensive tax bills.
South Florida businesses in the technology, health and life sciences, and industrial sectors (or “THInc” businesses for short) have several decisions to make as they compare new options for deductions, expensing, and tax rates, based on variables, such as their size, maturity, and entity type.
Here’s what South Florida THinc companies need to know about tax reform.
Assessing benefits of corporations and pass-throughs: New provisions for pass-through entities and C corporations have owners and shareholders re-examining their choice of business entity (i.e., S corporation, partnership, etc.). For some entities, the lower corporate tax rate of 21 percent (previously 35 percent) and the potential to partially exclude gains of certain small business stock from taxable income under the section 1202 rules may ultimately make it worthwhile to incorporate as a C corporation. Conversely, C corporations aren’t eligible for the new section 199A deduction of 20 percent of domestic qualified business income (“QBI”). Other factors include the maturity of the business and plans for how profits will be used (e.g., investments versus shareholder distributions).