Tax Reform Compromise Reached
Posted: December 14, 2017
Republicans have apparently reconciled their respective versions of the Tax Reform and Jobs Act. The key provisions of the latest version of the massive tax reform measure are as follows.
- Beginning in 2018, the corporate rate would be reduced to 21% from the current 35%.
- The top individual tax rate would be reduced from 39.6% to 37%.
- A state and local tax deduction will be allowed for both state income and state property taxes, and capped at $10,000.
- The corporate alternative minimum tax would be fully repealed. The individual alternative minimum tax would remain, but would exclude individuals whose income is under $500,000, and families with incomes over $1 million.
- The mortgage interest deduction would be limited to mortgages of $750,000 or less.
- A 20% deduction would be allowed for income attributable to business entities like S-corporations, limited liability companies, and partnerships.
- The estate tax remains, but the gift, estate and generation-skipping tax exemptions would be doubled to $10 million, per person, ($20,000,000 per couple), indexed for inflation. (After accounting for inflation, these exemptions will be $11.2 million per person and $22.4 million per couple in 2018.)
None of the following will be repealed in the final version of the Republican’s Tax Reform measure:
- Medical expense deduction;
- Tax-free graduate school tuition waivers;
- Private activity bonds;
- Student loan interest deduction; and the
- Teacher spending deduction.
Given the strong likelihood that the Act will become law, we encourage you to contact your tax advisor to discuss steps that need to be taken before year end that could benefit you. As always, do not hesitate to contact us if we might be of assistance.
By Andrew J. Willms