ALAMOSA — Michael Davis of Wall Smith and Bateman and Associates took some time to highlight some of the most important aspects of the new tax law and answer questions at the Alamosa Rotary Club on Monday.
The two most important changes that Davis pointed out were/are the restructuring of the income bracket, and returns that pertain to small businesses. At first glance, the new code mostly affects those who own their own businesses and those who are married and filing jointly. The income bracket has been restructured to be more specific and itemized deductions on the new tax return forms are much more condensed.
The biggest item for small businesses is the Qualified Business Income (QBI) deduction. This is a reduction of 20 percent from taxable income for small businesses. Davis noted that this deduction has the potential to be a “significant saving.” However, Davis also pointed out that the parameters of a qualified business are still a bit unclear. In addition, service based industries will not be qualified for this new deduction. What defines a “service based industry” remains to be seen.
Other notable changes that have been implemented include the maximum amount of income that can be donated to charity has been increased from 50 percent to 60 percent. The state property tax has also now been capped at $10,000. These new changes are also expected to give taxpayers increased flexibility.
While there is still an element of uncertainty with the new law, Davis does not anticipate that it will have too many negative effects. In fact, for most San Luis Valley residents, there will not be much that changes. The new law will remain in effect until 2025. Davis and the WSB team are available for those who have questions.