https://www.cpa-wfy.com/wp-content/uploads/2017/11/tax-reform-e1510771649913.jpg 140 180 Chanelle Bossert https://www.cpa-wfy.com/wp-content/uploads/2023/02/WFY_Horizontal-Logo-50-1.png Chanelle Bossert2017-11-15 18:47:452020-09-18 21:15:06Senate Tax Plan Outline Released
The Senate Republican’s tax reform plan was released last week. Several proposals changed from the House Tax bill. The key changes in the plan from the current law are as follows:
- Current tax rates: Seven brackets from 10% to 39.6%.
- Proposed tax rates: Seven brackets at 10%, 12%, 22.5%, 25%, 32.5%, 35% and 38.5%.
- 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 $1,650 and add a $500 credit for nonchild dependents.
- Eliminate most itemized deductions, including property taxes and state and local tax deductions (will keep charitable contributions and medical expense deduction).
- Continue to exclude from gross income up to $500,000 for joint filers ($250,000 for other filers) on the sale of a principal residence if the taxpayer owned and used the home for five out of the previous eight years (currently two out of five years). The exclusion would be available once every five years (currently every two years).
- Repeal of the alternative minimum tax.
- Double the exemption for the estate tax amount to $10 million (no plan for repeal).
- Small and family-owned business and flow through entities (Sole Proprietorships, Partnerships and S Corporations) will receive an additional 17.4% deduction of domestic qualified business income (limited to 50% of the W-2 wages of the taxpayer) effective in 2018. Certain professional service businesses are not eligible for the deduction, with a possible exemption if the qualified income is less than $150,000 (joint filers).
- Proposed C Corporation tax rate 20% effective in 2019 (most other provisions begin in 2018).
- Imposing a one-time 10% tax on accumulated foreign earnings, reduced to 5% for illiquid assets.
- Nonresidential and residential rental property tax depreciation reduced to 25 years.
- Increase Section 179 expensing limitation, deducting the cost of certain property, to $1 million and the phase out threshold to $2.5 million (currently $510,000 expense limitation with $2 million phaseout) and certain nonresidential property improvements would also qualify for Section 179 expense.
- Limit the deduction for net interest expenses incurred by a business in excess of 30% of the business’s adjusted taxable income and any disallowed interest may be carried forward indefinitely.
- Eliminate the deduction allowed for Section 199 domestic manufacturing activities after 2018.
- Disallow deductions for entertainment, amusement or recreation but retain 50% deduction for business related meals.
WFY will update you as the plan progresses into a bill.
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