The House passed its version of tax reform today!
Its passage also adds new pressure in the Senate, where party leaders are working with a far slimmer majority than in the House. The House and Senate bills differ in critical ways.
Below is a summary of the major provisions that have passed the House. As a boutique CPA firm specializing in tax, we continually track tax legislation and will keep you informed as this effort moves through the Senate.
For individuals and families, the Tax Cuts and Jobs Act:
- Lowers individual tax rates for low- and middle-income Americans to Zero, 12%, 25%, and 35% so people can keep more of the money they earn throughout their lives, and continues to maintain 39.6% for high-income Americans.
- Significantly increases the standard deduction to protect roughly double the amount of what you earn each year from taxes – from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
- Eliminates special-interest tax breaks that increase rates and complicate Americans’ taxes – so an individual or family can file their taxes on a form as simple as a postcard.
- Takes action to support more American families by:
- Establishing a new Family Credit – which includes expanding the Child Tax Credit from $1,000 to $1,600 to help parents with the cost of raising children, and providing a credit of $300 for each parent and non-child dependent.
- Preserving the Child and Dependent Care Tax Credit
- Preserving the Adoption Tax Credit
- Maintains the Earned Income Tax Credit
- Streamlines higher education benefits
- Continues the deduction for charitable contributions
- Preserves the home mortgage interest deduction for existing mortgages and maintains the home mortgage interest deduction for newly purchased homes up to $500,000.
- Continues to allow people to write off the cost of state and local property taxes up to $10,000.
- Retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts
- Repeals the Alternative Minimum Tax
- Provides immediate relief from the Death Tax by doubling the exemption and repealing the Death Tax after seven years.
For job creators of all sizes, the Tax Cuts and Jobs Act:
- Lowers the corporate tax rate to 20% – down from 35%, which today is the highest in the industrialized world – the largest reduction in the U.S. corporate tax rate in our nation’s history.
- Reduces the tax rate on the hard-earned business income of Main Street job creators to no more than 25%
- Provides a new, low tax rate of 9% for the first $75,000 of business income earned by owners of pass-through businesses of all types who earn less than $150,000,
- Establishes strong safeguards to distinguish between individual wage income and pass-through business income
- Allows businesses to immediately write off the full cost of new equipment
- Protects the ability of small businesses to write off the interest on loans
- Retains the low-income housing tax credit
- Preserves the Research & Development Tax Credit
- Strengthens accountability rules for tax-exempt organizations
- Modernizes our international tax system so America’s global businesses will no longer be held back by an outdated “worldwide” tax system that results in double taxation for many of our nation’s job creators.
- Makes it easier for American businesses to bring home foreign earnings t
- Prevents American jobs, headquarters, and research from moving overseas
CLICK HERE to learn more about the Tax Cuts and Jobs Act.
If you have any questions regarding this Bill or the potential impact to your specific situation. Please do not hesitate to contact us.