December 14, 2017
New Tax Law Closer To Reality
As most people are aware, there are big changes brewing in the world of federal income taxes. This morning it appears that Congress is one step closer to voting on a massive overhaul of the federal tax code. We have been monitoring the bills from the House and the Senate as this process moves along, and there is no doubt that it has caused tax planning for the end of 2017 to be a bit clouded to this point. While there is no guarantee that the two Chambers will pass the bill, the vote does appear to be scheduled for next week.
While details of the compromise between the House and Senate bills are sketchy, there are some areas that appear to be in place, assuming the bill passes, and most are effective in 2018, and do not apply to 2017
The top individual tax rate would drop to 37%, and although the exact changes to rates below that is not yet available, the general approach is to reduce individual brackets and lower rates across the board. Individual penalties for not having health insurance appear to be dropped in the bill. The standard deduction is almost doubled so that fewer people will itemize, while the personal exemptions go away. Mortgage interest gets limited to interest paid on home acquisitions with notes of $750,000 or less which is down from $1,000,000. Property taxes and state income taxes get limited to $10,000 for deduction. For individuals, this is a mixed bag and can be a tax cut for some and a tax increase for others. Alternative Minimum Tax remains in the law, but changes are made to raise the level of income required before it kicks in. There are many more provisions and areas that will affect many people in good and bad ways.
Corporate tax rates drop from a high of 35% to 21%. There is a deduction related to pass through income (S Corporations and Partnerships). It is not a tax rate, but a deduction from income that was 23% in the Senate bill, but has not been announced in the compromise as to rate. There are limits related to service based income and high income individuals, so it remains to be seen how much effect that will have. Again there are hidden traps and limits that will require much review and analysis.
We are available to discuss how this bill affects you, and will keep following to update as the bill progresses and more facts come out.
This tax season is an important one for many business owners because it’s the first that will be impacted by the Tax Cuts and Jobs Act (TCJA). How big of an impact is dependent on your unique situation. We’ve compiled this short list of provisions that may affect the business community:
According to Forbes.com, Super Bowl viewers traditionally load up on millions of pounds of less-than-healthy foods during the big game—including ribs, pulled pork, tortilla chips, nuts, popcorn and bacon—all washed down with beer (the Super Bowl beverage of choice). If you are trying to stick to your New Year’s resolution to eat better, consider a few healthy substitutes for the traditional Super Bowl eats:
The combination of running a business and your life and preparing for tax time can drive some people into a slight panic. But no need to get stressed if you are prepared. Now is the time to start organizing all documents required to file your tax return.