Page 45 - GIADA-May-2018-Final

15% to the cash basis of accounting. In the Q. Which changes will used-car dealers

past, Buy Here Pay Here (BHPH) dealers benefit from the least?
couldn’t use the cash basis of accounting A. In the past, dealers could deduct 50
because of the inventories. The cash percent of all entertainment and meals.
method of accounting couldn’t be used if Under the new law, clients and customers
OFF inventories were a material part of income. entertainment expenses are non-deductible.
Under TCJA, inventories aren’t consider a
YOUR FIRST material part of income if the average gross Q. Could you explain the pass-through
business taxes section?
receipts are less than $25,000,000.
A. We’re talking about the 20 percent tax
ORDER Q. Which changes will used-car dealers deduction for businesses. Generally, “S”
benefit from the most? corporations and partnerships don’t pay
OF FORMS A. I believe BHPH dealers will benefit income tax at the entity level. The income
the most from the potential use of the from these entities are passed to the
Enter coupon code at checkout: cash basis of accounting and the new 20 individual and they’ll report the income
GIADA15 percent deduction for qualified business on their personal return. The business

income from a sole proprietorship, deduction will allow them to deduct up to
giada.org/dealersupplies partnership, limited-liabilities company or 20 percent of the qualified business income.
S corporations. This will allow these entities
LIMITED TIME OFFER. to exclude up to 20 percent of their qualified Q. What are your overall thoughts about
EXPIRES DEC 31, 2018. business income from taxable income. the new TCJA changes?
For example, if a car lot earned a quailed A. I think the changes will be positive
business income of $100,000, dealers would for individuals by way of a lower tax
be able to exclude $20,000, meaning they’d bracket. The changes will help ease their
only pay tax on $80,000. This is going to be depreciation rate and allow them to have
good for used-car dealers. the new 20 percent deduction. n
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