One of the defining aspects of President Donald Trump’s presidential campaign was his focus on changing tax laws. With the lack of progress on repealing Obamacare, the President turned his attention to tax reform. Both the Senate and the House have now passed the bill. Some of the changes and what we can expect of their possible effects include:
Federal Corporate Tax Slash
President Trump has said on multiple occasions that he wants to slash the current 35% federal corporate tax rate to a 21% rate. President Trump supports the lower rate, believing that it will produce more jobs, make the country more competitive in the global marketplace and spur economic growth.
It would also create a 20% business income tax deduction for owners of “pass-through” businesses, such as partnerships and sole proprietorships; allow for immediate write-off by corporations of new equipment costs; and eliminate the corporate alternative minimum tax.
Removal of Property Tax Deduction
Another piece is to remove the federal deduction for state and local property taxes. New homebuyers would now only be able to deduct interest on the first $750,000 of mortgage debt on a newly-purchased home, down from the current $1 million threshold.
In many states, the average deduction saves property owners thousands of dollars. Some opponents say that one-quarter of middle-class families would see raised taxes, especially in areas like New York City and San Francisco where home prices exceed the cap regularly.
Change of Tax Brackets
The bill keeps seven personal income tax brackets and lowers that tax rate for most brackets, including dropping the top rate to 37% from 39.6%. The value of a person’s retirement account may be impacted if a person moves to a lower tax bracket. He or she may consider taking the taxes taken out now rather than hoping to have a lower tax rate at the time of retirement.
Cap on Itemized Deductions
For single filers, the bill increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700. The net effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your deductions exceed your standard deduction.
Removal of Alternative Minimum Tax Rates
Higher-income earners could benefit from the elimination of the alternative minimum tax. Such individuals would not be required to pay the non-graduated alternative minimum tax rate if it is removed.
The experienced attorneys at Robert J. Fedor Esq., LLC can help resolve complicated tax controversy issues for businesses and individuals. We can provide guidance on how tax law changes may impact you. We keep current on all tax laws and changes and can explain to you how to plan ahead for possible changes. Contact tax attorneys at Robert J. Fedor Esp., LLC by calling us at 800-579-0997.
