14 FABRICARE FE ATURE partnerships, and S corporations. It is essentially a deduction of up to 20 percent of the business’ net income, limited to the greater of (1) 50 percent of W-2 wages or (2) 25 percent of W-2 wages plus 2.5 percent of the unadjusted basis of depreciable property used in the business. This deduction does not apply to, among others, the professions of medicine, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services. However, ownership of rental real estate does qualify. For those landlords who have little or no W-2 wages, 2.5 percent of the original depreciable cost (thus land is excluded) of their property may provide a sizeable deduction. For most laundromat owners, W-2 wages are small, but investment in equipment and improvements are large. So, as with rental real estate owners, a deduction based on 2.5 percent of depreciable property is a nice benefit. The law giveth, as well as taketh away. There are clearly winners and losers. Those with estates below $22.4 million are obvious winners; with proper planning, they will not have any estate tax to pay. While the tax rates have seemingly decreased, the elimination of personal exemptions and many itemized deductions (state income taxes and real estate taxes being the single biggest deduction that was eliminated) and the increase in the kiddie tax may cause an overall increase in tax. Those taxpayers who previously did not itemize will do substantially better under the new law. That is also true of low- to moderate-income taxpayers who have minor children. Those business owners whose primary source of income is a qualifying business will also make out better. If they can deduct 20 percent of the business’ income, which would otherwise be subject to 37 percent tax, their effective tax rate becomes 29.6 percent {37 percent - 7.4 percent (20 percent x 37 percent)}. Not eliminated in the new law is the 3.8 percent Obama investment tax, levied on interest, dividends, capital gains, and rents. Thus, the marginal tax rate on this income for a high income taxpayer is 40.8 percent. Yes, there is definitely much still to digest here. And, no, it’s not too soon to consult your tax professional and start your 2018 tax planning! Richard Weisinger has been a licensed CPA for more than 40 years. He operated his own CPA practice for 20 years and, for the last nine years, has headed the tax department for Gerber & Co., a CPA firm in Los Angeles. Mr. Weisinger has had more than 130 of his articles published, and he has spoken on tax issues to laundry owners across the country for more than 25 years. continued from page 13 NOTE: This item originally appeared in the February 2018 issue of Planet Laundry, the magazine of the Coin Laundry Association. It is reprinted here with kind permission from CLA.