As a finance leader, it's important to investigate and discuss the impact of the 2018 tax reform on your organization.

With the Tax Cuts and Jobs Act of 2017, Congress delivered the largest overhaul of the tax code in over two decades. But because the 2018 tax reform was only signed into law in the last weeks of 2017, businesses are scrambling to develop a deep understanding of the changes and their impact on their organizations.

To help you get a handle on the new rules, here are three major considerations for finance leaders and their organizations.

Pass-Through Business Income

According to Business Insider, business owners of firms that operate as S corporations, sole proprietorships, LLCs or partnerships and who report business income on their personal tax returns can now deduct 20 percent of their qualified business income, defined as the "net amount of [the business's] qualified income, gains, deductions and losses." While there are a number of caveats to this, the overall impact should be positive.

Corporate Tax Rate

Effective as of January 1, 2018, according to the Journal of Accountancy, the corporate tax rate will fall to 21 percent, a significant reduction from the previous 35 percent maximum rate for C corporations. The new 21 percent rate is a flat tax, while the previous tax rate was graduated, with the maximum rate being levied upon businesses with taxable income over $10 million.

Taxation of Foreign Income

The Journal of Accountancy also notes that U.S. shareholders of foreign corporations that generate foreign income will now be taxed at a lower rate due to a significant tax deduction. That said, the specifics of the deductions are convoluted and dependent on a number of different factors.

Due to the complexity of the 2018 tax reform law and its immediate entry into practice, finance leaders are uniquely positioned to serve as major resources regarding applicability and compliance. Even so, don't hesitate to reach out to a tax specialist to resolve any uncertainties.

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Tags: tax compliance strategic planning