If you want history to repeat itself, then do nothing and maybe it will.
But if you want 2019 to be better for your business than 2018, identify what worked well in the past year and what did not: Consider cash flow, profit, budget, sales, expenses, marketing, hiring, morale, employee success and any other major area within your business.
A time-honored concept is to “manage by exception.” That means keep doing the things that worked well in 2018 in generally the same way. But identify things that did not work well, study them and create an improvement plan. Get expert help if needed. Be proactive, tweak the processes and track results.
A quote that is very meaningful to me is: “A vision without a plan is just a mirage.” Plan and make it happen.
The new federal tax reform rules passed in December 2017 require serious attention. Hopefully you have already been communicating with your tax advisor about how those changes impact you. Most people and businesses will see reduced federal taxes, but the process will be different and possibly more complicated. Your awareness of how to maximize the benefits of federal tax reform could save you significant federal tax dollars.
The Hawaii Legislature so far has elected not to follow 2017 federal tax reform and has kept the older higher tax structure for state income tax. Unless this position changes (anything is possible), Hawaii will have two sets of tax rules to follow: one for Hawaii tax returns and another for federal tax returns. So much for tax simplification.
Other than the reduced 2018 federal income tax rates, which impact everyone, and the doubling of the standard deduction, which helps many, here are a few more significant changes that you should be familiar with or ask your tax preparer about:
- If you bought any business property in 2018, there is a good chance you can immediately expense it rather than depreciate it over several years or more. This might be good for reducing taxes but will reduce your profitability, which you might need to explain to your bank.
- For certain flow-through entities and self-employed individuals, you might be able to deduct 20 percent of your qualified business income (QBI). This could be huge but complicated. Work with your tax preparer as soon as possible to maximize this potential tax saving opportunity.
- The state and local tax (SALT) is now limited to $10,000. For high income tax states like Hawaii this could catch a few people. Your income tax and real estate taxes are capped at $10,000. Rental and business properties are not included in this cap.
- It’s only deductible for $750,000 of mortgage debt and no deduction for home equity loans if not specifically used to buy or improve your home. There are some dates, twists and turns to the mortgage deduction rules so check with your preparer for your specific situation.
Good luck in 2019. With proper planning and a dash of discipline it could be the best year yet!