Income Dynamics and TCJA

NOL Carryforward and rarely back, Tax Cuts and Jobs Act. What’s a Deferred Tax Asset to do? Businesses and the individuals connected to them have real changes and opportunities to grapple as we move forward in 2018.

PL 115-97, commonly known as the Tax Cuts and Jobs Act introduced changes to business and individual taxation, creating potential tax advantages and affecting cash flow differently in various business scenarios.

In expanding businesses, income can be dynamic, with intermittent years of losses and profitability. TCJA changes directly impact current and future tax liability. Potential Income Deductions, expanded Section 179 expensing, 100% Bonus Depreciation and reduced Tax rates potentially create tax advantages separately and in combination.

Tax advantages create positive cash flow scenarios. Short and long term. Some temporary, others permanent. Amounts differ based on business entity structure, ownership allocation, the type of business conducted and the underlying wage and asset compositions. When a future tax benefit is likely to be realized, a deferred tax asset is recognized. A deferred tax asset can be viewed as a tax liability cushion in future years when the business is profitable. More with SoundCPA Insights for Business.