The House Ways and Means Committee just released the details of their tax reform bill, “Tax Cuts & Jobs Act,” on Thursday, November 2, 2017. If passed, this would be the first time in over 30 years the US tax system would receive an overhaul.

Individual Highlights

  • Individual tax brackets would be reduced from seven to four, 12%, 25%, 35% and 39.6%
  • Standard deduction would roughly double, but most personal itemized deductions and credits would be eliminated
    • Increase standard deduction to $12,200  for individuals
    • Increase standard deduction to $18,300 for head of household
    • Increase standard deduction to $24,400 for married couples
  • Eliminate student loan interest, medical expense, and moving deductions
  • Cap mortgage-interest deductions for newly purchased homes at $500,000 down from the current $1 million max
  • Repeal personal exemptions
  • State and local property tax deduction limited to $10,000
  • Repeal deduction for alimony payments
  • Repeal state and local income tax deduction
  • Expand child tax credit from $1,000 to $1,600 and add a family credit of $300 for each parent and non-child dependent
  • Repeal the alternative minimum tax
  • New maximum rate of 25% on business income of individuals
  • The following non-refundable credits would be repealed:
    • Credit for individuals over 65 or who have retired on disability
    • Adoption credit
    • Mortgage credit certification
    • Plug-in electric motor vehicles
  • Streamline educational credits
  • Increase estate and gift tax base exclusion amount to $10 million (subject to inflation)
  • Repeal estate gift tax after 2023

Business Highlights

  • Cut corporate tax rate from 35% to 20%
  • Most business credits would be repealed including the work opportunity credit. The R&D credit would not be repealed
  • Immediate expensing 100% of the cost of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023
  • Increase Section 179 expensing to $5,000,000 (up from $500,000)
  • Expand use of Cash Method of Accounting
  • Limit business interest expense to 30% of business adjusted taxable income

Start a conversation with one of our tax advisors today for help on understanding what these potential changes may mean to you or your business.