Jason Busco, CPA, manager, Smolin Advisory, Tax and Accounting in Red Bank, repeatedly addressed concerns from attendees at the NJBIZ discussion on Construction, Development and Real Estate regarding impending tax changes put forth by the Trump administration.
Busco, who focuses on construction among other industries, said that while it is still too soon to tell, construction and real estate development most certainly will be affected.
“Not really knowing, at this point, exactly what major changes will accompany Trump’s potential policies is certainly a challenge,” he said. “But the construction industry in particular is going to go through a lot of changes in 2019 regarding how revenue is recognized on company books. That typically has to do with identifying performance obligations on contracts and measuring progress in order to satisfy those obligations.”
As far as for other businesses and residents in New Jersey, anything goes, Busco said.
“[Trump’s] been saying that there will be major tax cuts for the middle class, but, in looking at some of the proposed policy changes, I’m not quite sure that’s the case,” Busco said. “It does seem, though, that there are major tax cuts for business owners.
“Reducing taxes for C-corporations from 35 percent to 15 percent, for example, would be fantastic for those businesses and also for the United States in terms of bringing business back to the country. Trump also is proposing that partnerships and S-corporations also be treated the same way, which is huge, considering those entities typically do not pay taxes right now, with all of the income passing on to the members or shareholders and their 1040s, potentially taxed at the highest marginal bracket of 39.6 percent right now.”
Busco then warned against being too optimistic.
“There are also implications for those salaried employees in New Jersey with children,” he said. “Trump is proposing to take away the personal exemption, which could mean substantial tax increases for those individuals because they will no longer receive deductions for those dependents.
“Comingling all of these different changes, it definitely will be a challenge on our end to guide and strategize with our clients for year-end planning.”