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Ajay Kumar, CPA


Five Quick Corporate Tax Tips (Under Tax Reform)

I would like to remind all my friends that a few minutes spent now on your tax planning can save you a lot of money (not counting the year-end frustration and lost opportunity). This is the perfect time to make some tax moves to lower your 2018 corporate taxes, since you already have a good idea of what your business income for the year going to be, and you still have plenty of time to take advantage of some easy tax-cutting strategies.
1.)     Flat 21% Tax Rate: Under the new law, Corporations will pay a flat 21% tax rate as opposed to a max tax rate of 35%. Further, there is no longer a separate tax rate for Personal Service Corporation; previously PSC paid a flat rate of 35%.

2.)     Capital Gain Tax: There is no longer a separate maximum tax rate on net long-term capital gains. All corporation income is taxed at 21%.

3.)     Dividend Deduction: The allowable deduction for dividends received from other taxable domestic corporations has been reduced from 70% to 50% of the dividends received, and for a 20% owned corporation the percentage has been reduced from 80% to 65%.

4.)     Alternate Minimum Tax (AMT): Effective beginning in 2018, the AMT for corporations is repealed.

5.)     Accounting Method: The new law expands the number of taxpayers that may use the cash method of accounting. The cash method of accounting may be used by taxpayers whose average annual gross receipts that do not exceed $25 million for the three prior tax-year periods.

Ajay Kumar, CPA

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Monroe Township,
New Jersey 08831, U.S.A.

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