Republicans Unveil Latest Tax Plan by Edward N. Cooper, CPA
Posted on November 13, 2017
House Republicans introduced on Nov. 2, 2017, the details of their plans for overhauling the tax code based on the vision outlined by the president a little over a month earlier. It is not expected that the plan will become the law in its present state, as lawmakers, lobbyists and other interested parties will debate, negotiate and potentially revise the plan before the New Year. Even with that in mind, following are some of the key provisions that lawmakers aim to achieve.
Individual Taxes
- Reduce the current seven tax brackets into four, and keep the current top rate of 39.6 percent for married taxpayers earning more than $1 million a year. The other three brackets include a 12 percent tax rate, which would apply to individuals with annual income of up to $45,000 (or $90,000 for married couples), 25 percent for individuals with annual income of up to $200,000 (or $260,000 for married couples), and 35 percent for annual income of up to $500,000 for individual taxpayers (or $1 million for married couples).
- Increase the standard deduction to $12,000 for single tax filers and $24,000 for married couples filing jointly (almost double the current deduction amounts)
- Increase families’ child tax credit to $1,600 from $1,000 per child under 17, and add a $300 credit for each parent and non-child dependent, such as an elderly family member
- Eliminate tax credits for adoptions and alimony payments
- Eliminate tax deductions for tax preparation services, moving expenses, student loan interest and medical expenses
- Preserve the deduction for charitable contributions
- Preserve the mortgage interest deduction for existing homeowners but cap the deduction at $500,000 on loans for future new home purchases. The current limit is $1 million.
- Eliminate the local and state income and sales tax deductions while limiting the state and local tax deduction to a cap of $10,000 on property taxes
- Preserve the tax treatment and salary deferral limits of 401(k) plans, for which plan participants may contribute up to a maximum of $18,500 in pre-tax dollars in 2018 (or $24,500 for workers age 50 and older)
- Double the estate tax exemption to $11 million for individuals and begin phasing out the estate tax entirely over a six-year period
- Repeal the alternative minimum tax (AMT)
Business Taxes
- Immediately and permanently reduce the corporate income tax to 20 percent from its current level of 35 percent
- Reduce the tax rate on profits earned by pass-through business entities to 25 percent rather than the individual rates that would apply to the business owner
- Apply a repatriation tax of as much as 12 percent on the overseas assets that U.S. companies bring back to the states
The advisors and accountants with Berkowitz Pollack Brant will continue to monitor tax reform efforts and update our clients as opportunities become clearer.
About the Author: Edward N. Cooper, CPA, is director-in-charge of Tax Services with Berkowitz Pollack Brant, where he provides business- and tax-consulting services to real estate entities, multi-national companies, investment funds and high-net-worth individuals. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.
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