The New Tax Laws: What Now?

At First National 1870, we are more than just a bank. Along with offering excellent banking products and services, we're here to help clients address a wide spectrum of financial needs. To do that, our local teams draw on our full organization's resources that include specialized industry expertise, as well as Wealth Management and Trust services.* In each community we serve, we also develop a professional network to help introduce our clients to relevant subject matter experts, including attorneys, CPAs, and real estate professionals.

Our intent is to provide our clients with a network that supports their success. If you have a question that's out of the traditional banking realm, we will help you find an answer. Right now, most of the questions we're hearing from clients focus on taxes.

The Tax Cuts and Jobs Act of 2017 – often called the Tax Simplification Act – is anything but simple. It's been 30 years since we've seen a massive tax overhaul like this, and the wide-sweeping changes affect everyone: individuals, trusts, corporations, and pass-through entities such as LLCs and S corporations. One way or another, we will all be impacted, along with our families and businesses.

While we wait for the Internal Revenue Service to issue guidance on detailed aspects of the changes, we can't put all our financial decisions on hold. Don't let the tax law changes stop you from doing something you would do otherwise for your business or your family or yourself. Simply keep in mind that what you do now will have an implication about how your taxes are treated in 2018.

As your banking consultant and connection to a broader network of financial experts, First National 1870 has partnered with tax experts in our local markets to provide insights into the legislative changes and their implications, including those unique to our regions. Given the tremendous interest in the seminars we've offered, we want to share a few highlights here, along with encouragement for you to discuss all the implications with your CPA or tax advisor.

One immediate change for businesses is that corporate tax rates are dropping to a flat 21 percent and the corporate alternative minimum tax (AMT) is repealed. The impact of the change depends on the type of business. For example, accountants and consultants – and others who run personal service corporations – will see a tax rate drop from the previous flat 35 percent.

Many of our business clients own pass-through entities – such as sole proprietorships, partnerships, LLCs, and S corporations. Under the new tax laws, these clients will receive a 20 percent credit on their personal tax return; a change designed to align their tax rate to the corporate rate. At the same time, many miscellaneous itemized deductions are suspended from 2018-2025, and those deductions include such items as auto expenses and home office expenses.

The tax law changes may even impact a company's approach to client service. Business gifts are still deductible, within limits. When it comes to wining and dining clients, the deductibility of business meals varies by situation.

In addition, business owners will not be allowed to deduct entertainment expenses anymore. The days of donating handsomely to a college or university in exchange for great seats at sporting events are over – at least for now.

Naturally, many of our clients have other concerns when it comes to colleges and universities: They're saving money in 529 plans for their children's future tuition. Will those contributions be deductible in 2018? While we wait for guidance on that, planning ahead and saving is always a good idea – whether the money is targeted for higher education, home improvements, or other major expenses.

What now? Keep moving forward. While the full implications of the new tax laws aren't known yet, we do know that knowledge is power. First National 1870 will continue to provide you with the information you need to make informed financial decisions. We are always available to review your current situation and work with you to plan for your ongoing success.

Scott Czarniak

Scott Z. Czarniak, CPA, is Regional President of First National 1870 in Albuquerque, Santa Fe, and Los Alamos, New Mexico. Scott has more than 19 years of experience in financial services. A licensed CPA in New Mexico, he brings a unique perspective and skill set to the banking industry, thanks to his experience in public accounting. | 505-798-5806

This article contains general information only. First National 1870 is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

*Investment and insurance products are not FDIC-insured, are not a deposit or other obligation of, or guaranteed by the bank or an affiliate of the bank, are not insured by any federal government agency and are subject to investment risks, including possible loss of the principal amount invested.