The House’s proposed Tax Cuts and Jobs Act was released on November 2, 2017. The Senate version of the bill was recently released with some substantial modifications to the House proposal. While not law, here are a few highlights of the Senate’s version of the bill:
- Changes the individual tax rates and brackets. The Senate version would retain seven tax brackets and reduce the top rate from 39.6% to 38.5%. All current tax bracket rates would be reduced.
- Provides for a standard deduction of $12,000 single, $18,000 head of household and $24,000 for married/families. This will convert quite a few itemizers to the standard deduction.
- Increases the Child Tax Credit from $1,000 to $2,000 for children under age 18. Income level phaseouts would be greatly increased.
- Repeals the phaseout on itemized deductions.
- Keeps the mortgage interest deduction on loans exceeding $1,000,000 (no change to present law).
- Caps the property tax deduction at $10,000 per year.
- Eliminates the deduction of state and local taxes, tax preparation fees, moving expenses, adoption fees, and unreimbursed employee expenses.
- Keeps the medical expense deduction and lowers the threshold to 7.5% of AGI through 2018.
- The Alternative Minimum Tax would be retained with higher exemption amounts.
- Doubles the current estate tax exemption level.
- Cuts the corporate tax rate to 20%; delayed until tax year 2019.
- Creates a new 23%% deduction for “pass-through” businesses.
- Allows 100% bonus depreciation for five years, before phasing out 20% each year for five years.
- Section 179 depreciation would be increased to $1,000,000 (from $500,000) annually with a phaseout beginning at $2,500,000 (from $2,000,000). Roofs would also be eligible for immediate expensing.
- Reduces residential and non-residential depreciation to 25 years.
- Eliminates Net Operating Loss (NOL) Carrybacks limiting to 80% of the taxpayer’s taxable income. Farmers would be able to carry NOL’s back two years.
- Repeals the required use of 150% declining balance for farmers.
- Eliminates the Domestic Production Activities Deduction.
The Senate and House versions of the bill still need to be reconciled together. While there will be many more modifications to the final bill and it does have to be passed by Congress, the two versions of the bill lay the foundation for next year’s possible tax code.
By: Joe Turnes
Keep following BHT&D CPAs for further updates regarding this bill. Please feel free to contact one of our CPAs at (616) 642-9467 or request a complimentary accounting consultation.