CliftonLarsonAllen (CLA) has published a Q&A blog on its website addressing how the new tax bill signed into law last month is likely to impact dealerships.
Written by Dave Wiggins, principal at CLA, the new article answers more than a dozen key questions related to the law and how it has changed the status quo.
“The recent tax reform legislation is the largest tax overhaul since 1986,” Wiggins writes. “While there are some elements of simplification (increasing the standard deduction, removing the alternative minimum tax (AMT) for businesses, etc.), the law as passed is quite complex. It will take years for the IRS to issue rulings and interpretations and for tax court rulings to settle disputes and offer clarity.
“The change most dealers are immediately curious about is the treatment of pass-through entity income (e.g., income flowing to an owner’s personal return from an S corporation or LLC). Under the new law, the top personal tax rate was reduced from 39.6 percent to 37 percent. Dealerships structured as pass-through entities are eligible for an additional 20 percent deduction against income, reducing the effective tax rate to 29.6 percent.”
From there, Wiggins goes on to address key questions such as ‘Is interest still deductible?’ ‘Is full expensing allowed for fixed asset purchases?’ ‘If we don’t get bonus depreciation, can we still claim Section 179 expense?’ and ‘If I plan to sell my dealership in the near future, does a C corporation now make sense more than an S corporation?’
To read Wiggins’ answers to each question and a dozen more, please CLICK HERE.