Contractors and business owners in the construction industry can expect to see lower taxes thanks to the Tax Cuts and Jobs Act. As Carl Grassi of McDonald Hopkins explains at Crain’s Cleveland Business, however, there’s some bitter with the sweet.
“One thing that we can expect is that most contractors will receive a tax savings in one form or another,” he writes.
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Contractors organized as C corporations will benefit from the new flat 21 percent tax rate. Those organized as pass-through entities such as limited liability companies or S corporations, will probably see a new deduction of up to 20 percent of their business income. That one is still a bit up in the air, however.
“But the bitter comes with the sweet, as other provisions in the TCJA may increase taxes,” Grassi says.
Among them:
- A cap on interest expense of 30 percent of the company’s federal adjusted gross income;
- Net operating losses can no longer be carried back and are now limited to 80 percent of taxable income; and
- Elimination of the domestic production activities deduction.
