On Thursday, November 2, 2017, The House Ways and Means Committee released the proposed Tax Cuts & Jobs Act of 2017. Here are some of the key changes being proposed that would impact individuals and businesses:
- Lower the individual tax rates for low-to-middle income taxpayers to 12, 25, and 35%. For joint returns, the 25% rate would start at $90,000 and the 35% rate would start at $260,000 ($45,000 and $200,000, respectively, for single, individual filers). The bill would maintain the current 39.6% tax rate for joint filers with taxable income of more than $1 million ($500,000 for individuals);
- Increase the standard deduction from $6,350 to $12,200 for individuals and $12,700 to $24,400 for married couples;
- Establish a new Family Credit, which includes expanding the Child Tax Credit from $1,000 to $1,600, and provide a credit of $300 for each parent and non-child dependent to help families;
- Eliminate personal exemptions;
- Continue the deduction for charitable contributions for those who itemize;
- No elimination of the 3.8% net investment income tax;
- No modification of the reduced tax rate on long-term capital gains and certain types of investment income;
- Grandfather in the home mortgage interest deduction for existing mortgages up to the current $1 million debt limit but lower the limit going forward for the home mortgage interest deduction on newly purchased homes up to $500,000;
- Continue to allow itemized state and local property taxes deduction but only up to $10,000;
- Eliminate the current itemized deduction for state and local taxes;
- Retain popular retirement savings options such as 401(k) and IRA plans as they are currently structured;
- Repeal the Alternative Minimum Tax (AMT); and
- Double the estate tax exclusion, with full repeal after six years.
- Lower the corporate tax rate to 20%;
- Limit the tax rate applied to a portion of a pass-through entity's business income to 25%;
- Create a temporary 100% expensing for qualified business property;
- Cap the deduction for net interest expenses at 30% of adjusted taxable income, except for small businesses;
- Modify the net operating loss deduction.
The House Ways and Means Committee is scheduled to begin "markup" sessions on the proposal on Monday, November 6, 2017. As amendments to the bill are expected, be sure to watch for updates on the Tax Cuts & Jobs Act of 2017 in our upcoming publications.