It’s Thanksgiving Week!
We’re hosting, kids are home, I’m cookin’……Life is good.
Before I get into the tax tip I want to share a story of thanks with you.
If you are a brewery and work with us, you know Bridget.
Ask any of our customers, and they will tell you Bridget is awesome. She is quick to respond, kick-ass brewery bookkeeper, and knows more about beer than anyone in the office.
She’s a homebrewer.
While all of these are important characteristics for a well run team, what makes Bridget the most dynamic person I have ever worked with is….she has survived 3 attempted poachings.
Two companies and a brewery to be exact. Each time it happens, we get together, crack a beer and discuss why this keeps happening to her.
Then I remember why….
So last week the tax and accounting team was stumped over an inventory issue. What happened was, ingredients were off by over $3,500 when they compare the brewery and accounting software.
Long story short, Bridget dug up a bill that a brewer has changed in a different accounting period.
We lit him UP.
Do you ever compare the inventory at the end of a period and think wtf happened here? If yes, then you need to call Bridget.
She can help.
Thank you Bridget, you rock!
Tax Tip Time
Last week we discussed the business changes proposed with the tax reform.
Remember, we are still unsure if the tax reform will pass in 2017, and if the changes will be retroactive or proactive.
This week I want to look at the personal changes that will affect you and your employees directly.
1) Change: Tax brackets will be simplified
What does this mean: Currently, for personal filers, there are 7 tax individual tax brackets. The change would eliminate 3 brackets leaving a 4-bracket system. What they are proposing increase the marginal steps between tax brackets. Some people will get pushed down into a lower rate, while others will be pulled up into the next higher bracket.
2) Change: Itemized deductions
What does this mean: A qualifying taxpayer receives a standard deduction of $6,350 for single or $12,700 for married filing joint in 2017. Qualified taxpayers may deduct more than the standard deduction if they have the following itemized deductions: Medical Expenses, State & Local Tax, Real Estate Tax, Home Mortgage Interest, Charitable Contributions. Lets dive in:
- Medical Deduction – Eliminated. This one affects the least amount of taxpayers due to the minimum you must spend on medical to qualify. Typically taxpayer with health insurance will not qualify.
- State & Local Tax – Eliminated. This deduction would hurt around 44 million taxpayers. People in “high tax” states such as California and New York will be most affected.
- Real Estate (Property) Tax – Remains alive. This deduction allows qualified taxpayers to continue deducting their property tax payments.
- Mortgage Interest – Remains alive. This deduction allows qualified taxpayers to continue deducting their home mortgage interest.
- Charitable Contributions – Remains alive. This deduction allows qualified taxpayers to continue deducting charitable contributions.
3) Change: Student Loan Interest deduction is eliminated
What does this mean? Currently you may deduct student loan interest on your personal tax return. The change will take this away. This is one of those deductions that phases out quickly. Lower income people will be most affected by this.
4) Change: Standard deduction would double
What does this mean? This change would increase a single taxpayer standard deduction from $6,350 to $12,000. Married filing joint would increase from $12,700 to $24,000. If you don’t itemize, this will help you. If you do itemize and exceed this new standard deduction, you won’t feel the benefit. See Change #2 for more on itemizing.
5) Change: Personal Exemption is eliminated.
What does this mean? Currently every taxpayer and dependent receive a personal exemption of $4,050. This exemption does phase out as income increases. The elimination of this will affect taxpayers in the lower tax brackets despite doubling the standard deduction.
6) Change: Alternative Minimum Tax (AMT) is eliminated.
What does this mean? AMT is a tax to make sure the “rich” pay taxes. If you are considered “rich” by IRS standards AMT was created to ensure you pay your fair share. This change would eliminate that tax.
Happy Thanksgiving from the Small Batch Standard
-cf, Bridget, Julie, Ruchi, Courtney
Looking for Tax Tips 1-8? Find them here.