2018 Federal Tax Law Changes Regarding C-Corporations

2018 Federal Tax Law Changes Regarding C-Corporations

C-Corporations And The New Tax Law of 2018

The tax on C-corporations was cut from a high of 39% to a flat 21% starting on January 1, 2018, by the new tax law.

This sounds great on the surface but in reality, if you have a C-Corp that is making less than $50,000 in profit per year, your tax rate on profits has been 15%.  So the passage of the “Tax Cuts and Jobs Act” did not cut your rate it actually increased your tax rate.  But the old C-Corp tax rate increased to 24% on the next $25,000 in profits. So if your corporation makes more than $75,000 the tax rates will be lower, starting in 2018.

So Why Use A C-Corp Now?

A C-Corp is the only type of company you can leave money in and not pay personal taxes on it, while that money remains in the company.  So this type of company is a good way to build up money to purchase other companies, purchase high-ticket items, or increase the capital of the company.  And if you can use Wyoming, as the place to have your company formed and operated from, there will not be any state taxes on that money that you leave in the C-Corp.  Keep in mind that if you take profits out of a C-Corp in the form of dividends, you will also pay personal taxes on that money.

The 2018 tax bill changes show that one of the only ways left to save on federal taxes is to own a business. A business can write off, within certain limits, things like interest, travel expenses, the purchase of business-related items, and rent. The new law takes out most deductions for individuals, but it leaves in place most deductions for corporations.

If you do not have a business formed now, this is the time to form one.  This is what we do at Wyoming Corporate Services, we help people form businesses.

If you need ideas as to what your business is going to do, please look at our list of aged shelf company names, which may give you ideas as to what you can do. We also offer tips and other strategies on how to benefit from the new tax law.