I just got off the phone with my CPA. The GOP tax plan is going to cost me tens of thousands more in taxes for tax year 2018. Let me explain how I understand this:
Most businesses are small businesses. Small businesses like LLC’s, Schedule C corporations, and the like are called “pass through entities” and the IRS treats them as though they do not exist, for tax purposes. In other words, whatever income that your business has is your income.
Larger companies tend to be corporations. Those are considered to be corporate persons, meaning that their income is considered separate from the owners of the company, the stockholders.
(I am simplifying this to make it easy to understand, please don’t flame me.)
As a part of the tax code changes, the GOP plan calls for doubling the standard deduction, and then eliminating nearly all other deductions, including the individual exemption, and itemized deductions like attorney’s fees, paid accountant fees, deductions for mechanics who buy their own tools, security guards buying their own weapons, etc.
Because of this, pass through entities and individuals will lose out when they can no longer deduct the cost of carrying out their livelihoods, but corporations can still deduct those expenses from profits as a cost of doing business, AND the corporate rate is reduced. This is one time that the liberals are correct: this is a huge handout for corporate welfare, one that benefits the corporate taxpayer while screwing the small businessman.