The New U.S. Tax Code and Its Affect On You
Good Morning!
There are many questions about the new tax plan currenty beeing looked at by the Senate. How will it affect all of us? There is much debate ahead and mostly likely many changes ahead before a bill is passed. The following is an article from "Realtor.com" that goes over what is currently being discussed.
After months of internal debate among Republicans, the House Ways and Means Committee released the details of its plan to overhaul the U.S. tax code for businesses and individuals. The highlights include lower rates for many individual households but not the highest earners; fewer individual tax brackets; a larger standard deduction for households who don’t itemize their tax bills; trimmed-back deductions for state and local taxes; eventual repeal of the estate tax; and much lower rates for corporate profits and profits for individuals on unincorporated business income. Here is a look at all of the details.
New tax brackets and rates
Tax treatment for the wealthy is among the hottest issues. The House Republican tax plan will preserve a top individual tax rate of 39.6%. Republicans last year had been discussing a top rate of 33%, and then moved to 35% earlier this year.
The retention of the 39.6% individual tax rate marks a shift in the way Republicans think about tax policy. For years, they had focused on driving down that top tax rate. President Trump says he is instead focused on middle-income cuts and large changes to the business tax code, which he argues will boost growth and hiring.
Effect on deductions and credits
The plan aims to increase the standard deduction, while adjusting several other deduction and credits.
House Republicans had planned to release the bill Wednesday but delayed it until Thursday to finish technical work on the legislation and address thorny issues such as how to treat deductions for state and local taxes. Party leaders want to repeal the deduction, but that has sparked a rebellion from lawmakers in high-tax states like New York and New Jersey and set off a scramble for compromise, centered on keeping the deduction for property taxes.
Standard Deduction
• Current law for 2017: $12,700 (married); $9,350 (head of household); $6,350 (single)
• Proposed for 2018: $24,400 (married); $18,300 (head of household); $12,200 (single)
Personal Exemption
• Current law for 2017: $4,050
• Proposed: Repealed Child Tax Credit
• Current law: $1,000
• Proposed: $1,600 plus $300 each for the taxpayer, a spouse and any non-child dependents
State and Local Taxes
• Current law: Itemized deduction
• Proposed: Deduction capped at $10,000 for property tax only
Charitable Donations
• Current law: Itemized deduction
• Proposed: Unchanged
Mortgage Interest Deduction
• Current law: Itemized deduction on loans up to $1 million
• Proposed: Itemized deduction for loans up to $500,000 on new home purchases
Alternative Minimum Tax
• Current law: Parallel tax that disallows personal exemptions and state deductions• Proposed: Repealed
Retirement Accounts
• Current law: 401(k) plans allow pretax deferral of up to $18,000
• Proposed: Minor changes
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