|November 6, 2017|
The House Ways and Means Committee Chairman Kevin Brady (R-TX) released the Tax Cuts and Jobs Act. This bill details the various cuts and changes to overhaul the tax code. The last major tax overhaul was done 31 years ago.
Some key highlights to the proposed bill are as follows.
Individuals – Reform to tax rates, deductions and exemptions:
- Reduce the number of tax brackets from seven (7) to four (4).
- Reduces the tax by increasing the level of income allowed in lower brackets.
- Increase the standard deductions for Single individuals from $6,500 to $12,000 and Individuals Married filing joint returns from $13,000 to $24,000. Single individuals with a qualifying child increase the Head of Household standard deduction from $9,550 to $18,000.
- The personal exemptions will be eliminated.
- Eliminates the above the line deductions for alimony, medical expense, student loan interest and moving deductions.
- Overhauls itemized deduction eliminating mortgage interest on a second home, state and local income or most sales taxes, casualty losses, and medical expenses.
- Reduces the itemized deductions for interest deductions on newly purchased homes
- Caps real estate taxes at $10,000.
- Reduce tax rates on pass-through business entities to 25%.
- Overhauls the education deductions and credits to a more simplified credit.
- Repeals the Alternative Minimum Tax.
- Changes in eligibility from exclusion of gain on sale of a principal residence.
- Double the exemption for estate tax.
- Maintains retirement programs such as 401(k)s and IRAs.
Business Tax Reform
- Reduce the corporate tax rate from 35% to 20%.
- Reduce tax rates on pass through business entities to no more than 25%.
- Establishes safe guard to distinguish individual wage income and “pass – through” business income.
- Allows for immediate write off for the cost of new equipment.
- Protects the write off of interest on loans for small businesses.
- Preserves the Research and Development Tax Credits.
- Reduces US taxes of foreign earnings.
- Allow for easier and less costly repatriation of foreign earnings.
Richard J. Maloney, CPA, ABV Kevin C. Kennedy, CPA, CFE Jessica L. Parasco, CPA Janeen A. Sorrentino, EA