The Trump Administration and select members of Congress have released a “unified framework” for tax reform that they’ve been working on during the last three months. The document provides more detail of what elements they are considering for reform, but it still leaves many specifics to be worked out by the tax-writing committees (i.e., the House Ways and Means Committee and the Senate Finance Committee). Yesterday, October 19, 2017, the Senate voted for a blueprint budget that will likely be supported by Congress and pave the way for this tax cut legislation.
Some of the current plan provisions affecting individuals would include:
- Increase the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for single filers;
- Eliminate the personal exemption and the additional standard deductions for older/blind taxpayers;
- Reduce the number of tax brackets from seven to three: 12%, 25%, and 35%;
- Increase the child tax credit;
- Repeal the individual alternative minimum tax;
- Largely eliminate itemized deductions, but retain the home mortgage interest and charitable contribution deductions; and
- Repeal both the estate tax and the generation-skipping transfer tax.
Some of the current plan provisions affecting businesses would include:
- Provide a maximum 25% tax rate for “small” and family-owned businesses conducted as sole proprietorships, partnerships and S corporations;
- Reduce the corporate tax rate to 20% (down from the current top rate of 35%);
- Provide full expensing for five years;
- Partially limit the deduction for net interest expense incurred by C corporations;
- Repeal most deductions and credits, but retain the research and low-income housing credits;
- Modernize special tax rules that apply to certain industries and sectors;
- Provide a 100% exemption for dividends from foreign subsidiaries; and
- To protect the U.S. tax base, tax the foreign profits of U.S. multinational corporations at a reduced rate and on a global basis.
Alerding CPA Group will keep you updated as the tax reform plan unfolds. In the meantime, feel free to contact us with any questions at 317-569-4181 or visit our website: www.alerdingcpagroup.com.