The House passed tax reform legislation Thursday by a vote of 227-205, with 13 Republicans voting against the bill. The Senate continues to struggle with mark-ups to its tax reform bill which is significantly different than the House version.
With so much uncertainty, it is difficult to predict what version of Tax Reform legislation will eventually pass into law, however, it is always wise to plan. Below, we outline the major changes included in the House Bill, referred to as the Tax Cuts and Jobs Act.
Changes for Individuals and Families
- The seven current individual tax brackets have been collapsed down to four brackets, (12%, 25%, 35%, and 39.6%).
- The majority of itemized deductions have been removed, while 3 itemized deductions remain: charitable donations, property taxes (up to $10,000/year) and mortgage interest (up to $500,000 of principal).
- The Child Tax Credit has been increased from $1,000 to $1,600, with the addition of a $300 credit for non-child dependents.
- The standard deduction has roughly doubled for individuals from $6,350 to $12,700 and for married couples from $12,000 to $24,000.
- The current personal exemptions for taxpayers and their dependents has been eliminated.
- Alternative Minimum Tax has been repealed.
- Estate tax has been scaled back significantly, doubling the exemption and repealing the tax entirely after 7 years.
Changes for Businesses
- Large corporations will only pay a 20% tax rate instead of the existing 35% tax rate, which is the largest one-time drop in the business tax rate in history.
- The tax rate on certain pass-through businesses has been reduced to 25%.
- Businesses will be able to write off the full cost of new equipment beginning immediately and will not have to wait until 2018.
We will continue to issue updates as changes arise. If you have questions pertaining to how these changes affect you or your business, please contact Weiss & Company LLP.