Corporate Tax Rate – Net Income now taxed at a flat 21% (previously, net income over $75,000 was taxed at 34+%)
Corporate AMT Repealed – This reduces complexity and helps companies avoid surprise taxes they hadn’t planned for.
100% Expensing – Most business assets purchased through 12/31/2022 can be deducted fully each year (rather than capitalized and depreciated) – though, startups with losses may wish to elect to forgo this benefit to preserve depreciation deductions for future years.
New §83(i) election – Individuals can elect to defer all income tax on certain stock options and Restricted Stock Units (RSU) for up to 5 years (or until the stock is publicly traded, whichever is sooner). Restrictions apply, and this deferral is generally not eligible for founders or the 4 highest compensated officers of the corporation each year.
R&D Credits can still offset payroll taxes! – The new law did not take away the amazing benefit for certain startups that allows them to offset up to $250,000 of payroll taxes per year with R&D Credits.
NOL Deduction limited to 80% of Net Income - That means startups will be paying tax the first year they have taxable income - prior law allowed companies to offset all regular income with prior loss carryforwards).
ALL Meals limited to 50% deduction – Prior law limited meals to 50%, but allowed 100% deduction for meals at company functions or on-site eating facility.
IRC §83(b) elections not available for RSU – Recipients of Restricted Stock Units can no longer elect to accelerate the taxable event for RSU. Thus, they will be exposed to more ordinary income when they later sell their vested RSU.
NO deduction for entertainment – Prior law allowed 50% deduction for (meals &) entertainment.
NO deduction for transportation – No employer deductions for commuter benefits, parking, transportation subsidies or reimbursements. Mass-transit and parking benefits, however, will continue to be tax exempt to employees, who can pay their own mass transit or workplace parking costs using pretax income, through an employer-sponsored salary-deduction program (but any bicycling commuter benefit is now taxable to employees).
Moving Expenses taxable to the employee – Any moving expenses provided or reimbursed by the company will be treated as ordinary compensation to the employee.