5 Things You and Your Business Should Know About Tax Reform
The first significant federal tax reform in 30 years will provide major savings for Hawaii businesses and corporations starting with this tax year but the changes are complex and still evolving, according to a panel of experts assembled by Hawaii Business.
The panelists at the SmallBiz Academy on Friday were:
- Reg Baker, a CPA, a consultant to small- and medium-size businesses and chair of the Chamber of Commerce Hawaii’s Small Business and Entrepreneurship Committee;
- Ben Godsey, president and CEO of ProService Hawaii, the largest HR services company in the Islands; and
- Tom Yamachika, president of the Tax Foundation of Hawaii and a tax attorney.
Hawaii Business editor Steve Petranik moderated and more than 100 people attended the event, which was held at the YWCA Laniakea.
Here are five significant takeaways for business and individuals from the discussion:
- HR departments should advise their employees to redo their W-4 forms, Godsey says, to recalculate what their federal income tax payroll withholding is under tax reform.
- Businesses can no longer write off expenses for qualified transportation fringe benefits for employees, like free bus passes, free parking, bicycle commuting and car expenses. “They used to be a nontaxable benefit to the employee, and you could write it off as a business. You can’t do that anymore,” Baker says. The same thing has happened to free food that some businesses provide for employees.
- Almost everyone in Hawaii should see some tax savings, Baker says. The much larger standard deduction will benefit people who don’t itemize deductions. Even those who do itemize deductions will likely save money, even though the deductibility of state and local income and property taxes is capped at $10,000 for married couples. Baker said he already done about 100 different 2017 tax returns for his clients and compared how those same returns would affected by the new law and said every one of those returns shows a savings.
- However, all three panelists agreed that the $10,000 cap on deducting state and local income and property taxes will get some affluent Hawaii residents thinking about moving to states where such taxes are lower. People with high incomes who live in low tax states will save much more under tax reform.
- The tax reform law is currently being interpreted and implemented by the IRS, so many of the details are still unclear. Also, most of the changes made under the tax reform are temporary and are set to expire in 2026, Baker says. The changes might be extended beyond 2026 or they might not be. But change could happen even earlier if Democrats gain control of Congress in the November elections.
“So even though these have all been passed and they’re working on trying to implement and interpret, there’s going to be changes whether they’re going to be done soon or in 2026,” Baker said. “So stay tuned. Stay on top of this or stay in touch with your tax preparer and hopefully they stay on top of this and just make sure that any changes that come along, you factor that in as you go forward.”
Monday, September 3, 2018, 10:45 am – 1:30 pm
YWCA Laniakea, Richards Street, Honolulu, HI, USA