Retail Observer

RETAILOBSERVER.COM APRIL 2018 56 T he new tax reform bill signed into law in December could benefit rent-to-own retailers in a number of ways. One of the changes highlighted the most is the reduction in the corporate tax rate from 35% down to 21%. Many rent-to-own dealers are small businesses, and those that claim their business as a "pass-through" could see a benefit as well. A pass-through enables small to mid-size business owners to file taxes under their own individual tax return, and profits are taxed according to the owner's personal rate. Companies organized as LLC's, sole proprietorships and partnerships are all pass-through companies and under the new tax plan, these businesses can deduct 20% of pass-through income. Other advantages that will be realized by the tax reform act are the reduction of taxpayer rates and doubling the standard deduction. If you are a rent-to-own retailer, take a look at your employee's paycheck. The new tax tables have been released and most of your employees and customers may already be seeing extra money in their paycheck! Changes in rates from last year to this are as follows: 2017 2018 Income Level Single Income Level Married-Joint 10% 10% $0-$9,525 $0-$19,050 15% 12% $9,525-$38,700 $19,050-$77,400 25% 22% $38,700-$82,500 $77,400-$165,000 33% 31% $82,500-$157,500 $165,000-$315,000 33-35% 35% $200,000-$500,000 $400,000-$600,000 39.6% 37% $500,000 + $600,000 + So, at this time, rent-to-own customers will be seeing more money in their paychecks and their buying power will be increased. Later they will be realizing higher tax returns due to the doubling of the standard deduction and the increase in the child tax credit. SIMPLIFIED ACCOUNTING RULES The new rules may also help rent-to-own retailers by exempting smaller businesses from having to account for inventories. The pre-2017 tax act code has multiple gross receipts tests for determining whether a taxpayer may use the cash receipts and disbursements method of accounting based on industry or entity structure. The new act amends the average gross receipts test, increasing three-year average gross receipts threshold which permits certain small businesses to use the cash method of accounting and exempts them from the application of the inventory and uniform capitalization rules. ACCELERATED DEPRECIATION CHANGES Another change affects inventory depreciation. Under prior law, there was a 50% bonus depreciation for property placed in service in 2017, 40% for 2018, and 30% for 2019. Qualified property miust be new, not used. Under the new law, there's 100% bonus depreciation for property placed in service after Sept. 27, 2017, and before 2023, 80% for 2023, 60% for 2024, 40% for 2025, and 20% for 2026. The acquisition date for property purchased with a written contract is the date of the contract. All of these changes could give rent-to-own dealers a boost, and we certainly hope that the industry, and our member businesses strengthen into 2018 and beyond. TAX REFORM COULD GIVE A BOOST TO RENT-TO-OWN RO Dennis Shields Rent-to-Own Trends Dennis Shields, Executive Director of the TRIB Group

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