5 Ways Trump Tax Plan Could Impact 2016 Year-End Planning

Donald Trump’s victory are and his proposed tax plan are making waves in the wake of the election last week. Robert W. Wood from Forbes gives us the 5 ways his tax plan could impact your year-end planning.

5-ways-trump-tax-plan-could-impactWith Republicans retaining control over the House and Senate, some tax cuts are inevitable. With this quite extraordinary confluence of events, President-elect Trump and Congress might tell the tax code, “you’re fired!” This could suggest that deferring income into next year if you can might be wise. Next year, the rates should be lower. 

1. Individual Rate Cuts
Trump proposes cutting the tax brackets to three: 12%, 25%, and 33%. He would eliminate Obamacare’s 3.8% net investment income tax, too. As a result, the top rate would be 33%, with the top rate on capital gains and dividends a firm 20%.

2. Business Tax Cuts
Corporations currently pay 35%. President-elect Trump would cut it to 15%. But he would eliminate most business deductions. And there would be simplicity. Instead of depreciation over many years, he would allow up-front deductions. 

3. Overseas Profits 
Trump’s plan would impose up to a 10% deemed repatriation tax on the accumulated profits of foreign subsidiaries of U.S. companies. That 10% toll charge would be payable over 10 years, Trump has proposed. Trump and his team say this change would trigger a huge inflow of funds back to the U.S. 

4. No Death Tax
Under current law, you can pass up to $5.45 million to your heirs tax-free. But beyond this, you pay an estate tax of 40%. It is entirely separate from income taxes. The president-elect said he would repeal it entirely. But if the estate tax is repealed, Trump’s proposal would allow income tax on the appreciation inherent in the assets for an estate valued in excess of $10 million.

5. Top v. Bottom
Not everyone is wild about the Trump proposals. Much of the criticism of Trump’s tax plans are that he would give the biggest breaks to the highest earners. Trump and his team have suggested that loosening of capital at the top will encourage investment, trigger transactions, create jobs and fuel economic growth. Change in the tax world is constant. Yet by any standards, some of the tax changes likely in 2017 and beyond are going to be huge.

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Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

Depre123 Resources for Help with Depreciation Answers

Depre123 is a cloud based application to manage fixed assets and generate a variety of depreciation reports on any desktop or mobile device. Get all of your depreciation answers based on just 3 key values (cost, date, asset class) and then utilize the open design to add all necessary fixed asset detail.

Where do you turn when you have a question about fixed assets or depreciation? On the Depre123 Resources tab there are many answers:

depre123-resources-for-help

The Resources tab provides useful links to:

  • Latest information on Tax Regulations
  • Current Accounting News stories on our blog depreciationguru.com
  • Depre123 Overview will help to get an understanding of basic features
  • White paper “Calculating Depreciation in the Cloud”
  • Depre123 User’s Guide
  • Getting Started Guide for first time users
  • Email & phone number for technical support
  • A link for each individual state’s rules regarding depreciation

By linking to our active blog on fixed assets and depreciation, you will always have access to the most current news and information. We monitor top accounting sites, magazines and other news sources to keep up with any related content so you don’t have to.

The documentation links should be your first stop for any questions on the Depre123 application. If you can’t find the answer here then reach out to our support team by email or phone. For anyone that needs to calculate depreciation for more than one state, you will greatly appreciate the links to get the specific rules for every state.

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

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Phase Out of Bonus Depreciation Requires Planning From Businesses

Under PATH, bonus depreciation was extended through 2019. Businesses are allowed to deduct 50% of their equipment cost up front in 2015, 2016, and 2017. It will drop to 40% in 2018 and 30% in 2019. Then it’s gone. However, Congress may grant another extension and, given its history, that’s pretty likely. But businesses should still properly prepare for this phase out. Those that don’t plan wisely could be setting themselves up for unexpected tax liabilities as the benefit expires. In an article in CFO author Nancy Geary outlines the questions CFOs should be asking

phase-out-of-bonus-depreciation-requires-planningWhat will this mean for taxable income? It depends on your specific business and how you have been treating equipment depreciation for tax purposes. 

What constitutes a qualified asset? For property placed in service before this year, qualified assets included items such as certain types of computer software, water utility property, and some leasehold-improvement property, as well as new tangible property with a recovery period of 20 years or less. 

What is qualified improvement property? Starting this year, qualified improvement property — including improvements that are made to building interiors, for example — can also be taken into account for bonus depreciation, regardless whether it is leased.

Are there any alternatives to bonus depreciation? It’s time to talk about Section 179 of the tax code.

While the current bonus depreciation structure allows for an immediate 50% deduction on new equipment, the Section 179 election is an alternative that allows companies to deduct up to 100% of their overall asset purchases in the year of acquisition, but with some significant limits.

How Can You Prepare for This Change? If your company has utilized bonus depreciation extensively in prior years, we recommend projecting out the next several tax years to see how the phase-out will affect your taxable income so that you can manage cash flow accordingly.

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Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

Author Suggests the Elimination of Accounting?

That may sound pretty dire even though the title of the new book Baruch Lev has co-authored is called  “The End of Accounting,” and suggests the finale of financial reporting as it stands currently, he cautions that he really isn’t calling for its absolute elimination. In an interview with David M. Katz and printed in CFO, Mr. Lev explains exactly what he is suggesting.

author-suggesting-the-elimination“We don’t recommend getting rid of financial reports. Financial reports as an historical document will always be important. You need to have some kind of an historical perspective of the business,” Lev, a professor of accounting and finance at New York University’s Stern School of Business, acknowledged.

“There is some importance in knowing the past,” he adds. “I don’t completely disregard it. But it doesn’t give you linear information about what will happen in the future.”

“What we are saying is that current financial reports don’t provide a clear guide with respect to the future. And that’s what we set out to change,” says Lev, referring to the book he wrote with Feng Gu, a professor of law and accounting at the University of Buffalo. 

In their book, recently published by Wiley, the authors contend and attempt to prove that “those voluminous and increasingly complex quarterly and annual reports… [have] lost most of [their] usefulness to investors….” They cite the Financial Accounting Standards Board’s 700-plus-page 2014 revenue recognition standard as an example of such length and complexity. 

Based mainly on non-accounting information, the report would focus on a company’s business model and execution of it. The document would highlight such “fundamental indicators” as Internet and telecom companies’ new-customer and churn rates; car insurers’ accident severity and frequency and policy-renewal rates; biotech and pharmaceutical company clinical trial results; and energy companies’ proven oil and gas reserves.

These indicators “are more relevant and forward-looking inputs than … traditional accounting information” like earnings and asset values, according to the book.

At least since the accounting scandals of the early 2000s, Lev has been a well-known advocate for more extensive corporate reporting of intangible assets. Following are edited excerpts from CFO’s interview with the financial reporting luminary. 

What does your title, “The End of Accounting,” actually mean?
The end of accounting in the current way it is conducted, meaning the constantly increasing, extremely complex regulations that fewer and fewer people understand. This, in our opinion, should come to an end. 

How practical would it be to put your system in place?
Very practical. We demonstrate our disclosure paradigm on four specific industries: media and entertainment, oil and gas, pharma and biotech, and insurance companies. The Strategic Resources and Consequences Report is not another 60- or 70-page report on top of the financial statements. It’s a one-page or, at most, two-page report which focuses on all the things which are missing from the financial statements.

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Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.

Trump Bringing Depreciation Into the Mainstream?

There’s a lot of reporting lately about what Donald Trump has and is saying. But for those of us in the tax business he brought up a topic during the second debate that is near and dear to our hearts – depreciation! In fact he uttered the magic word no less than three times. While we here at Depreciation Guru talk about depreciation often and even have a section of our website dedicated to it (What Is Depreciation?) we don’t generally hear much about it outside our niche of the business world. However, with 80 million viewers tuning in, it could be our moment in the sun! Peter J Reilly in an article on Forbes tells us more. 

In answer to Anderson Cooper’s question on how many years he has avoided paying federal income tax, Trump responded

No, but I pay tax, and I pay federal tax, too. But I have a write-off, a lot of it’s depreciation, which is a wonderful charge. I love depreciation.

Donald Trump - The Ugly American

I’m going to give you a little elementary accounting, which you can skip if you want, but it is important.  Trump’s refusal to be bound by elementary accounting, which as a graduate of Wharton he must understand, is the source of much of his success.

The fundamental accounting equation is assets (the stuff you own) equals liabilities (the amount you owe) plus equity (the net of the two, which might be negative). Every transaction has two sides to it – a debit and a credit.  They need to be equal.

And that brings us to depreciation, the accounting concept that Trump loves so much. Besides his expression of love last night, depreciation is featured much in Trump: The Art of the Deal

…..I don’t have to please Wall Street, and so I appreciate depreciation.  For me the relevant issue isn’t what I report on the bottom line, it’s what I get to keep.

Back to elementary accounting, bottom line is “net income”, the amount that is closed to equity at the end of the year for both your tax basis balance sheet and your GAAP (generally accepted accounting principles) balance sheet.  GAAP is what gets reported to investors. And tax basis is what goes to the IRS.  If you are really nerdy, you will read the notes to the financial statements that reconcile the two numbers.

Under both GAAP and the income tax basis of accounting, assets that have a limited useful life are subject to depreciation.  Their cost is charged (written off) to the income statement over a period of time. Debit depreciation (an expense) credit accumulated depreciation (kind of a negative asset that offsets the basis of the asset being depreciated). In real estate, buildings depreciate.  Land does not.

On conventional financial statements, all depreciable assets are on a death march .  Their only hope is to be sold which will give them a new lease on life on some other balance sheet or continued in the twilight world of fully depreciated assets that show up and do their job every day in the business operation, but are of no account to the accountants.

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Read More About Depreciation Here:

Questions? Comments? Let us know in the comments section below.

More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.