On the heels of the recently passed 2018 budget resolution that allows for tax legislation to increase the federal deficit by $1.5 trillion over 10 years the House Republican leaders released details of its tax overhaul plan. The key changes in the plan from the current law are as follows:
Individuals:
- Current tax rates: Seven brackets from 10% to 39.6%.
- Proposed tax rates: Four brackets at 12%, 25%, 35% and 39.6%.
- Current standard deduction: $6,350 individuals and $12,700 married filing joint.
- Proposed standard deduction: $12,000 individuals and $24,000 married filing joint.
- Elimination of personal exemptions, worth $4,050 per person.
- Increase child tax credit from $1,000 to $1,600 and add a $300 credit for non-child dependents.
- Eliminate most itemized deductions, including state and local tax deductions (will keep charitable contributions deduction).
- Limit itemized property tax deduction to $10,000.
- Limit home mortgage interest on new loans up to $500,000 debt.
- Repeal of the alternative minimum tax.
- Double the exemption for the estate tax and repeal it after six years.
Businesses:
- Small and family-owned business and flow through entity tax rate reduction
- Current maximum tax rate 39.6%.
- Proposed maximum tax rate 25%.
- (Sole Proprietorships, Partnerships and S Corporations).
- Current C Corporation tax rate 35%
- Proposed C Corporation tax rate 20%.
- Global minimum tax of 10% applied to income that American companies earn anywhere in the world.
- Imposing a one-time 12% tax on accumulated foreign earnings, reduced to 5% for illiquid assets.
- Allowing businesses to expense the cost of certain new property placed in service after September 27, 2017, and before January 1, 2023.
WFY will update you as the bill progresses through the expected many changes before it is slated for a vote and potential law.
Contact us at info@cpa-wfy.com to discuss how to maximize your 2017 tax benefits through comprehensive year-end tax planning.
By Richard A. Huffman, CPA MST
Wright Ford Young & Co.