The Tax Cuts and Jobs Act (H.R. 1) is scheduled for a vote this week.
The House is expected to vote on the bill Tuesday 12/19/17. The bill would then go to the Senate for vote.
If passed, the changes would be in effect for 2018 taxes, with tax returns for 2017 unaffected.
Following is a summary of the tax changes contained in the Tax Cuts and Jobs Act.
Individual Taxes
Tax brackets: The tax plan sets seven tax brackets, which will expire after 2025.
For married couples filing jointly:
• 10 percent up to $19,050
• 12 percent up to $77,400
• 22 percent up to $165,000
• 24 percent up to $315,000
• 32 percent up to $400,000
• 35 percent up to $600,000
• 37 percent over $600,000
For unmarried individuals and married couples filing separately:
• 10 percent up to $9,525
• 12 percent up to $38,700
• 22 percent up to $82,500
• 24 percent up to $157,500
• 32 percent up to $200,000
• 35 percent up to $500,000
• 37 percent over $500,000
Standard deduction: For eight years beginning in 2018, the standard deduction increases to $12,700 from $6,350 for individuals and to $24,000 from $12,000 for married couples.
Child tax credit: Doubles the child tax credit to $2,000 per dependent child under the age of 17, with a refundable portion of $1,400. The refundable portion allows families to lower their tax bills to zero and receive a refund for the remaining value.
Personal exemption: Ends $4,050 individual personal exemption.
Inheritances: Increases the exemption for estate and gift taxes to $10 million from $5 million per person and indexes the new exemption level for inflation after 2011. That means even fewer Americans would pay the estate tax, but it would stay on the books.
Mortgages: For residences bought from Jan. 1, 2018, through Dec. 25, 2025, caps the deduction for mortgage interest at $750,000 in home loan value. After Dec. 31, 2025, the cap will revert to $1 million in loan value. Suspends the deduction for interest on home equity loans.
Obamacare mandate: Repeals a federal fine under Obamacare for not obtaining health insurance coverage.
Corporate Taxes
Corporate tax rate: Cuts corporate income tax rate to 21 percent from 35 percent, beginning Jan. 1, 2018.
Pass-throughs: Creates a 20 percent deduction for the first $315,000 of qualified business income for joint filers of pass-through businesses such as partnerships and sole proprietorships. For income above that threshold, the legislation phases in limits that produce an effective marginal tax rate of no more than 29.6 percent.
Corporate minimum tax: Repeals the 20 percent federal corporate alternative minimum tax.
Territorial system: Exempts U.S. corporations from U.S. taxes on most of their future foreign profits, ending the present worldwide system of taxing profits of all U.S.based businesses, no matter where the profits are earned.
Repatriation: Sets a onetime mandatory tax of 8 percent for illiquid assets and 15.5 percent for cash and cash equivalents on $2.6 trillion in U.S. business profits currently held overseas. That foreign cash pile was created by a rule that allowed foreign profits to be tax-deferred if they were not brought into the United States, or repatriated, a tax rule that would be rendered obsolete by the territorial system.
Capital expensing: Allows businesses to immediately write off, or expense, the full value of equipment for five years, then gradually eliminates 100 percent expensing over a three-year period beginning in year six.
Clean energy: Leaves in place tax credits for producing electricity from wind, biomass, geothermal, solar, municipal waste and hydropower.
Carried interest: Leaves in place the “carried interest” that benefits private equity fund managers and some hedge fund managers. These financiers can now claim a lower capital gains rate on much of their income from investments held more than a year. The new legislation would extend that holding period to three years
The House Ways and Means Committee has issued a Summary of the Tax Cuts and Jobs Act.
Click here to link to the Summary.
Click here to download the Summary.