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Though it’s still early in the process there are some key elements of the current tax bill proposal that were released last week. Below is a few of the changes that have been proposed.
Proposed tax cuts for businesses:
* Cutting the top corporate tax rate to 20 percent from 38 percent.
* Capping at 25 percent the tax rate for pass-through corporations including sole proprietorships, partnerships and S corporations (down from the current 39.6 percent max).
* Shifting international taxation to a territorial system, encouraging U.S. corporations to repatriate earnings from 
foreign subsidiaries.
* Allowing full expensing of business investments, rather than the standard depreciation model.
Proposed tax cuts for individual taxpayers
* Individual tax rate brackets trimmed to three rates of 12, 25 and 35 percent, down from the current seven brackets.
* Nearly doubling the standard deduction, to $12,000 for individuals and $24,000 for joint filers.
* Eliminating all but two itemized deductions: home mortgage interest and charitable deductions.
* Eliminating personal exemptions for dependents, but increasing the Child Tax Credit.
* Repealing the estate tax.
* Repealing the Alternative Minimum Tax (AMT).
Nothing is official yet. There are many things that must happen before any sort of tax reform proposal would become law. There will be many hurdles and debates over sticking points before anything happens, such as;
* Accountability for the shortfall in federal revenue and the impact on government spending that will be created by this tax reform bill.
* There will be states and constituents that will fight to keep things such as the one that removes the state and local tax deductions on the federal return. This is especially important to the residents of high tax states such as California and New York.
* There could be many deductions eliminated and the standard deduction increased (doubled), if this reform is passed there will be fewer taxpayers that itemize their taxes. This may also have an impact on charitable contribution and mortgage interest deductions.
* The lowest income tax bracket is now 10% but would raise to 12%. The authors of the proposal say that this increase would be offset by the higher standard deduction.
Tax reform is a wait and see game that has a long way to go before there are any changes made and none of which are likely to effect for 2017 returns. At Summit CPA we offer multiple resources to assistance you with tax planning, contact our office at (260) 497-9761 to schedule an appointment with our advisors.
