WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby The Tax Cuts and Jobs Act Are you ready for tax “reform”? Thanks to the final version of the Tax Cuts and Jobs Act, the tax rate for incor- porated dri l l ing businesses wi l l be reduced from its current 35% to 21% - for the 2018 tax year and thereafter. Best of all, the business tax cuts are perma- nent, although the reduced tax rates for individuals expire in 2026. Unfortunately, while regular C Corporations will be taxed at a flat 21% tax rate, the majority of small businesses doing business as pass-through entities might face new personal tax rates higher than the corporate tax rate. Pass-through businesses such as partnerships, limited liability companies (LLCs), S Corporations, and sole proprietorships pass their income to their owners who pay tax at the individual rate. The new law allows pass-through owners who are mar- ried and make less than $315,000 (again, half this amount for single taxpayers) to take a 20% deduction. For pass-through owners with income above this level, the new law provides a deduction for up to 20% of business profits - reducing the owner’s effective marginal tax rate to no more than 29.6%. Unl ike in past years when a dr i l l ing business was required to claim depreciation, spreading the recovery of their equipment costs over several years, many businesses will be able to fully and immediately deduct the cost of certain equip- ment. What’s more, this provision has been made retroactive to September 27, 2017. Of course, the faster write-off of equip- ment costs is only temporary. Obviously, there are many more changes contained in the massive, 1100-page Tax Cuts and Jobs Act. The Section 179, first-year expensing allowance is now $1 million (up from $500,000 in 2017) for business equipment and property expendi- tures. The ceiling after which the Section 179 expensing allowance must be reduced dollar-for-dollar has also been increased from $2 million to $2.5 million. Section 199, the deduction for so-called domestic production activities, has been repealed. Partnerships will no longer cease to exist upon the death or exit of a partner. The dreaded Corporate Alternative Minimum Tax has been eliminated, but the tax deduction for interest expenses can no longer exceed 30% of the oper- ation’s adjusted gross income. With few exceptions, the potential tax savings from the Tax Cuts and Jobs won’t appear until the tax bill for 2018 comes due. Planning to reap those savings should, of course, begin immediately. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com New England Water Well Association c/o Markets Beyond Group 7 Bailey Lane, Brewster NY 10509 Phone: 845-278-1892 Fax: 845-278-1899 NEWWEXPO@gmai l.com Pre-Registration $ 20 per person Spouse &Children under 16 years FREE Onsite Registration $ 25 Registrant (s) Names: Contact: Address: State/Zip Code: Phone & Fax : E-mail: Pre-Registration Deadline - March 1, 2018 Complete this form and fax or mail it along with your payment ASAP to NEWWA. Register online at www.newwassociation.org Pre-Registration NEWWA New England Water Well Expo March 16 - 17, 2018 Best Western Royal Plaza Trade Center Marlborough, Massachusetts Credit Card Type __________ Credit Card Number ________________________ Expiration Date ________________CCV (security code)_______ 29 WorldWide Drilling Resource ® FEBRUARY 2018 I like nonsense - it wakes up the brain cells . . . It’s a way of looking at life through the wrong end of the telescope . . . and that enables you to laugh at all of life’s realities. ~ Theodore S. Giesel