The final version of the Tax Cuts and Jobs Act was just released. The House and Senate are expected to vote on it early next week and it appears the Republicans have enough votes to pass it. These changes will not impact the 2017 tax return you will file in a few months as they are all effective either January 2018 or January 2019. Here's a rundown of what's in the final bill according to the Washington Post -
A new tax cut for the rich. The tax rate for top earners is reduced from 39.6 percent for a married couple earning over $470,70 and a single person earning over $418,400. The bill would drop that to 37 percent for married couples earning over $600,000 and a single person earning over $500,000.
There are still seven tax brackets but the percentages change and the threshold for each bracket has changed. Until the bill passes and the IRS issues new withholding tables, employees will not see any change to the taxes coming out of their paychecks. It will probably take several months for payroll systems to be updated.
A massive tax cut for corporations. Starting in January 2018 the corporate tax rate falls from 35 percent to 21 percent. This is the largest one-time rate cut in US history.
You can deduct just $10,000 in state, local and property taxes. The bill originally restricted the $10,000 deduction to just property taxes, but the final bill allows any state and local taxes to be deducted, whether for property, income or sales taxes.
Working class families get a bigger child tax credit. The child tax credit was increased from $1000 to $2000. Families making up to about $400,000 get to take the credit and up to $1400 of the credit is refundable, meaning families that work but don't ean enough to actually owe any federal income taxes will get a check back from the government for up to $1400.
The individual health insurance mandate goes away in 2019. Americans would no longer be required by law to buy health insurance or pay a penalty if they refuse to do so. Current law remains in place for 2018. The Congressional Budget Office projects the change will increase insurance premiums and lead to 13 million fewer Americans with health insurance in a decade.
The inheritance tax threshold was doubled. For single taxpayers that means the first $11 million you inherit won't be taxed and for a married couple the first $22 million won't be taxed.
"Pass through" companies get a 20 percent reduction. S corporations, LLCs, partnership and sole proprietorships all pass through income to the business owner's individual tax return. The majority of these companies will now get to deduct 20 percent of their income tax-free. Service businesses such as law firms and doctor's offices can only take the deduction if their income is below certain levels.
Corporations no longer have to pay the alternative minimum tax (AMT) and fewer families will have to pay the individual AMT. The AMT will apply to single taxpayers earning over $54,300 and couples earning over $84,500, although nearly everyone who ends up paying the AMT earns considerable more than that.
The student loan deduction, the medical expense deduction and the graduate student tuition waivers remain.
The Johnson Amendment stays in place. Churches, synagogues, mosques and other nonprofits can't get political and endorse candidates in elections.
How this all gets paid for remains unclear.
This is a massive bill - more than 1100 pages. Analysts and tax experts will be pouring over it all weekend and many more details will be available next week. Turner's Tax Service will continue to keep you updated as more information becomes available.
A new tax cut for the rich. The tax rate for top earners is reduced from 39.6 percent for a married couple earning over $470,70 and a single person earning over $418,400. The bill would drop that to 37 percent for married couples earning over $600,000 and a single person earning over $500,000.
There are still seven tax brackets but the percentages change and the threshold for each bracket has changed. Until the bill passes and the IRS issues new withholding tables, employees will not see any change to the taxes coming out of their paychecks. It will probably take several months for payroll systems to be updated.
A massive tax cut for corporations. Starting in January 2018 the corporate tax rate falls from 35 percent to 21 percent. This is the largest one-time rate cut in US history.
You can deduct just $10,000 in state, local and property taxes. The bill originally restricted the $10,000 deduction to just property taxes, but the final bill allows any state and local taxes to be deducted, whether for property, income or sales taxes.
Working class families get a bigger child tax credit. The child tax credit was increased from $1000 to $2000. Families making up to about $400,000 get to take the credit and up to $1400 of the credit is refundable, meaning families that work but don't ean enough to actually owe any federal income taxes will get a check back from the government for up to $1400.
The individual health insurance mandate goes away in 2019. Americans would no longer be required by law to buy health insurance or pay a penalty if they refuse to do so. Current law remains in place for 2018. The Congressional Budget Office projects the change will increase insurance premiums and lead to 13 million fewer Americans with health insurance in a decade.
The inheritance tax threshold was doubled. For single taxpayers that means the first $11 million you inherit won't be taxed and for a married couple the first $22 million won't be taxed.
"Pass through" companies get a 20 percent reduction. S corporations, LLCs, partnership and sole proprietorships all pass through income to the business owner's individual tax return. The majority of these companies will now get to deduct 20 percent of their income tax-free. Service businesses such as law firms and doctor's offices can only take the deduction if their income is below certain levels.
Corporations no longer have to pay the alternative minimum tax (AMT) and fewer families will have to pay the individual AMT. The AMT will apply to single taxpayers earning over $54,300 and couples earning over $84,500, although nearly everyone who ends up paying the AMT earns considerable more than that.
The student loan deduction, the medical expense deduction and the graduate student tuition waivers remain.
The Johnson Amendment stays in place. Churches, synagogues, mosques and other nonprofits can't get political and endorse candidates in elections.
How this all gets paid for remains unclear.
This is a massive bill - more than 1100 pages. Analysts and tax experts will be pouring over it all weekend and many more details will be available next week. Turner's Tax Service will continue to keep you updated as more information becomes available.
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