Ted Bauman Celebrates 2018 Tax Cuts
Close to Christmas in December 2017, the United States Congress passed the Tax Cuts and Jobs Act, and President Trump signed it into law. Supposedly, one of the purposes of the new law was to simplify the tax code. That never happens. Every time Congress modifies the tax code, they wind up complicating it. However, the new tax law will result in lower taxes for many businesses and individual taxpayers, and that’s a good thing.
The Editorial Director of Banyan Hill Publishing is Ted Bauman, an expert on personal finance. He gave his readers a lot of great advice on how to take advantage of the new law and saving money on their taxes. The new law is effective January 1, 2018. One of the most obvious things it does is raise the standard deduction. Because of that, many people will no longer find it advantageous to itemize deductions. However, people with relatively low income will wind up paying less in taxes, which was one of the goals of the legislation.
Bauman identified one important strategy for people running small businesses, mainly sole proprietorships. They should form pass-through entities such as limited liability companies, S corporations and partnerships. They’re known as “pass-throughs” because the entity does not file a separate tax return. Instead, the person who owns files the regular Schedule C to calculate their net income, then puts that on the front of their 1040.
Effective January 1, 2018, pass-through entities do not pay taxes on the first 20% of their net profits. This means their owners should take a salary as low as possible. The rules for this are simple when the business profit is around the $100,000 to $200,000. However, if your profits exceed that, the rules get complicated and you should get expert advice. Professionals such as doctors, lawyers and others may be able to save money on taxes by splitting their business into parts. They need to consult a tax expert on advice regarding that. Many high-level business people would save money if they become a consultant for their company instead of an employee.
Bauman is Editorial Director for Banyan Hill Publishing. He produces his own newsletters and advisory services: The Bauman Letter, Plan B Club and Smart Money Alert. He focuses on ways to empower people by safeguarding their wealth and privacy from governments, especially on an international basis. Although born in Washington D.C., he spent much of his career managing funds for nonprofit organizations in South Africa.
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