On the face of it the US Tax Code passed by Senate on 20th December, 2017 and signed by the President on 23rd December, 2017 can be said to be historian as it is first such overhaul in more than 30 years.
It has something in it for everyone – Individuals, corporations and business owners. But this bill has generated curiosity as it is believed to benefit the rich and political donors more as compared to the middle class who are up in arms. However the President calmly said, “results will speak for themselves.” Does he mean future poll results or US economy or endless future donations from donors – we need to wait and watch.
Summary of changes for individuals and businesses are listed below:
FOR INDIVIDUAL FILERS
- Lowers (many) individual rates although preserving the seven tax brackets to 10%, 12%, 22%, 24%, 32%, 35% and 37%.
- Nearly doubles the standard deduction for single filers to $12,000 and for married couples to $24,000.
- Eliminates personal exemptions from existing $4,050 to 0.
- Caps state and local tax deduction to $10,000.
- Expands child tax credit to $2,000 for children under 17.
- Creates temporary credit for non-child dependents of $500.
- Lowers cap on mortgage interest deduction on a new mortgage on a first or second home to $750,000. The bill would no longer allow a deduction for the interest on home equity loans.
- Curbs who’s hit by AMT by reducing the number of filers who would be hit by it by raising the income exemption levels to $70,300 for singles and to $109,400 for married couples.
- Preserves smaller but popular tax breaks like medical expenses, student loan interest and classroom supplies bought with a teacher’s own money.
- Exempts everybody from the estate tax by doubling the money exempt from the estate tax from the current set at $5.49 million for individuals and $10.98 million for married couples.
- Slows inflation adjustments in tax code which will subject more of your income to higher tax rates in future years.
- Eliminates mandate to buy health insurance.
FOR BUSINESSES AND CORPORATIONS
- Lowers tax burden on pass-through businesses by a 20% deduction for non-service related business. 20% deduction for service business is available only if taxable income is more than $315,000 if married ($157,500 if single).
- Includes rule to prevent abuse of pass-through tax break that is if the owner or partner in a pass-through also draws a salary from the business that money would be subject to ordinary income tax rates. But to prevent people from re-characterising their wage income as business profits to get the benefit of the pass-through deduction, the bill would place limits on how much income would qualify for the deduction.
- Slashes corporate rate to 21% from 35%. The bill has repealed the alternative minimum tax on corporations.
- Change how U.S. multinationals are taxed.
NPowersU Expert Opinion
With US economy in doldrums and deficit set to increase by a staggering $1.46 trillion over a decade according to the nonpartisan Joint Committee on Taxation it seems that the President has bit more that what he can chew. The ‘Christmas gift’ is more music to the ears of corporations and businesses at the cost of middle income earners who have revolted the passage of this bill tooth and nail. The idea of this great tax code is to increase disposable income in the hands of citizens and corporates which will lead to more spending further leading to more employment and recovery of dull US economy.
All’s well that will end not in the great Mexico ‘Wall’!
Related Links
Bare Act
https://www.gpo.gov/fdsys/pkg/BILLS-115hr1eas2/pdf/BILLS-115hr1eas2.pdf
Article Link
http://money.cnn.com/2017/12/15/news/economy/gop-tax-plan-details/index.html