November Monthly Newsletter – Tax Cuts and Jobs Act

Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

Last Thursday House GOP leaders unveiled the Tax Cuts and Jobs Act (TCJA), a tax plan that proposes a broad overhaul to the corporate and individual tax system, building from the framework announced in September by the White House and House GOP leaders. The TCJA proposes to create more jobs, grow paychecks and bring fairer taxes to American families.[1]  After the release of the TCJA, President Trump called the Act “an important step toward providing massive tax relief for the American people.”[2] Led by the House Ways and Means Committee Chairman Kevin Brady (R-Tex) and Speaker of the House Paul Ryan (R-Wis), the TCJA proposes to be the biggest rewrite of the tax code since 1986 and may allow an individual or family to file their taxes on a form as simple as a postcard.[3]

Here are some of the TCJA’s key proposals for individuals and corporations[4]:

  • Reduce individual tax brackets from seven to four: 12%, 25%, 35% and 39.6%
  • Increase the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples
  • Eliminate estate taxes for estates of decedents dying after December 31, 2023
  • Limits home mortgage interest deduction to loans of up to $500,000, down from $1 million
  • Elimination of most personal itemized deductions and many credits, including:
    • Student-loan interest deduction
    • Medical-expense deduction
    • Moving deduction
    • Alimony-payment deduction
  • Repeal of the Alternative Minimum Tax
  • Establishes a new Family Credit, which includes expanding the Child Tax Credit to $1,600 and provides a credit of $300 for each parent and non-child dependent
  • Reduces the deduction of state and local property taxes to $10,000
  • Corporate tax rate cut to 20% from 35%
  • Creates a one-time repatriation tax, designed to incentivize U.S.-based companies that do business overseas to bring those profits back to the States

Notably, the TCJA does not make any changes to 401(k) and charitable deductions, something that had been rumored to be included in the initial proposal but for the time being is not on the chopping block.

There has been a mixed reaction to the TCJA as details continue to trickle out. By slashing the corporate tax rate from 35% to 20%, big corporations would get a substantial tax reduction. And those corporations with cash from profits overseas and avoiding the 35% corporate tax rate could bring that money back to the U.S. and pay one-time repatriation taxes at a 12% rate. Some middle-class families will also benefit from the increased standard deductions. However, families who live in high-tax states and itemize their deductions could pay more because of the proposed limitations on the state and local tax deduction.

How to pay for the tax cuts in the TCJA will be a hotly debated issue in the coming weeks. Representative Brady has said the bill will add $1.51 trillion to the federal deficit over the next 10 years.[5] However, along with House Speaker Ryan, GOP leaders claim the TCJA will save a typical family of four as much as $1,182 a year.[6]

Next Steps

The Ways and Means Committee plans to revise the TCJA next week with the goal of moving towards producing a final bill for the House of Representatives to consider later this month. The Senate is working on its own bill, which will need to be reconciled with the House version before a final piece of legislation will reach President Trump’s desk for his signature.

While the Tax Cuts and Jobs Act could turn out to be the biggest tax cut and reform since 1986, it is a long way from becoming a reality, especially considering the Tax Reform Act of 1986 took months to crawl through the legislative process.[7] We will continue to keep you updated as the TCJA moves its way through Congress.

 

 

Share:
facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.
Share Post: facebook Created with Sketch. twitter Created with Sketch. linkedin Created with Sketch. mail Created with Sketch. print Created with Sketch.

RECENT POSTS

Should I Open a Traditional or Roth IRA?

Multiple retirement savings vehicles are available but having options can be overwhelming. Each option comes with different rules leading to a variance of outcomes in the short-term and long-term. It’s not that dissimilar to choosing what to eat.

Carson Investment Research’s Outlook ’23: The Edge of Normal

At long last, The Carson Investment Research team is proud to officially release our 2023 Market and Economic Outlook, aptly titled Outlook ’23: The Edge of Normal. You can download the whitepaper here. As you are all painfully aware, 2022 wasn’t pretty for investors – it was the first year …

What Documents You Should Provide to Your Tax Preparer

Mike Valenti, CPA, CFP®, Director of Tax Planning Tom Fridrich, JD, CLU, ChFC®, Senior Wealth Planner It’s January, so it’s officially tax season! One of the most common client questions heard by tax preparers is, “So, what do you need from me?” The short answer to that question is often, “ …

10 Tax Planning Tips That Could Reduce Your Taxes

There’s more to tax planning than you think. Do you understand how each of your accounts are taxed? How did you set up your retirement plan? Have you considered an HSA? Take control of your taxes and how they fit into the big picture. Check out these income tax planning tips. Click here to …

1 2 3 62 63 64

Get in Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.

Schedule a Consultation

TweetsFollow Us