Everyone has been on the edge of their seats since President Trump’s campaign promises about tax reform. Well folks, we are just about there. Congress has voted and the tax reform bill has passed. Next step is the White House. I’m sure all of you have heard numerous versions of what’s included and what’s not and how it may or may not affect you. Here are some of the major topics included in the major tax overhaul:
· 7 rates ranging from 10 to 37% while increasing the salary requirements for each bracket
· Reduces corporate rate from 35% down to 21%
· Eliminates of the corporate AMT and significantly increases the personal AMT exemption amount
· Up until now, pass through entities (partnerships, LLCs, S corporations, sole proprietorships) have paid taxes at the owner’s tax rate. Under the new bill, owners could apply a 20% deduction to the business income (subject to limits starting at $315,000)
· Repeals Obamacare penalties for those without qualifying insurance coverage
· Nearly doubles the standard deduction ($12,000 for single filers, $24,000 for married). However, personal exemptions would be eliminated.
· Reduces the amount of combined property, state income tax, and sales tax that could be deducted to $10,000
· Reduces the amount of mortgage interest that can be deducted to new loans of $750,000
· For medical deductions, reduces the threshold from 10% to 7.5% exceeding AGI for 2018 and 2019.
· Doubles the child tax credit to $2,000 per child under the age of 18 until 2024. The new bill would also increase the phase-out amount to $500,000 and would cap the refundable portion of the credit at $1,400 in 2018.
· Doubles the estate tax exemption from $5.6 million to $11.2 million. These higher thresholds would disappear in 2026.
In the coming weeks, we will talk in detail how these revisions will affect YOU and how you can plan accordingly to save tax dollars and continue to build your wealth!