Greater Fort Lauderdale Chamber of Commerce issued the following announcement on Jan. 25.
The marine industry is significant in Broward County and in South Florida; according to the Marine Industries Association of South Florida, the industry’s many local businesses provide 111,000 jobs in Broward County and 142,000 jobs regionally, driving economic output of $8.9 billion in Broward County and $12 billion regionally. The marine industry encompasses many thriving businesses, such as marinas, boat dealers, repair shops, manufacturers, marine technology sellers and other support services.
In December of 2017, Congress sent the Tax Cuts and Jobs Act (the Tax Act) to President Trump for signature. The bill was signed and enacted as law on December 22, 2017. This new tax law, effective beginning in 2018, includes significant tax reductions which could benefit the marine industry when filing for 2018.
One of the most significant items in the Tax Act was a decrease in the highest corporate income tax rate, from 35 percent to 21 percent. This tax rate reduction will provide significant benefits for some marine industry businesses taxed as corporations.
Unfortunately, many of South Florida’s marine industry businesses are not taxed as corporations; they are, instead, taxed as S corporations or partnerships. These businesses do not pay corporate income taxes and therefore do not benefit from the reduced corporate tax rates. Instead, income earned by S corporations or partnerships is taxed personally, by their owners, as part of their individual income tax return filing. Income tax for these businesses is calculated based on their owner’s personal income tax rate.
S corporation and partnership owner’s personal income tax rates vary, based on their income levels. At higher income levels, their personal tax rate may exceed the new 21 percent corporate tax rate. The highest personal income tax rate is now 37 percent, which is significantly higher than the 21 percent corporate tax rate.
In order to maintain the pre-Tax Act rate structure, the Tax Act includes a provision, known as Section 199A, which provides many S corporation and partnership owners with an additional tax deduction that may lower their highest income tax rates from 37 percent to 29.6 percent. When applicable, this tax rate reduction results from an additional tax deduction of up to 20 percent of qualified business income.
On Friday January 18, 2019, the IRS issued Final Section 199A Regulations. The Regulations encompass 247 pages and are somewhat complicated. The Regulations require businesses to provide their owners with certain specific information, so they can properly calculate the 199A tax deduction. Qualified trade or businesses, such as boatyards, marinas, manufacturers, refit, and repair services, and others, qualify for the new Section 199A tax deduction.
The new tax law is complicated, but the benefits could be great. You should consult with your tax advisor to determine how to take advantage of the Section 199A tax breaks.
Original source can be found here.
Source: Greater Fort Lauderdale Chamber of Commerce