1400 N. Park Blvd, Ste 607, Grapevine, TX 76051
|

Accounting
Executive Business Advisory
Income Tax Preparation

Tax Cuts and Jobs Act

The items below highlight the major changes in the “Tax Cuts and Jobs Act” as of the passing by the House of Representatives of the Bill that emerged from the Conference Committee.  The income tax changes in the new tax bill, unless otherwise noted, are effective for tax years beginning on or after January 1, 2018 (they do NOT effect the 2017 tax returns to be filed in 2018).  The personal/estate changes noted below are subject to a Sunset Provision (unless changed in later years by Congress, the personal/estate items below revert back to their 2019 amounts beginning with tax years beginning January 1, 2026).

Business Changes

  • Corporate Tax Rate – The corporate tax rate decreases from 35% to 21%.  This permanent tax cut (no Sunset provision) is effective beginning 2018.
  • Corporate Alternative Minimum Tax (AMT) – The corporate AMT is repealed.
  • Pass-through Business Income – Certain pass-through business income will receive a 20% deduction on that pass-through income. (subject to the Sunset provision for tax years starting January 1, 2026).
  • Repatriation “Toll Tax” – The rate the businesses will have to pay to repatriate cash (or cash equivalents) from foreign countries is 15.5%.
  • Net Operating Loss (NOL) Deduction – The Bill limits NOL deductions to 80% of taxable income for tax years beginning in 2018 (subject to the Sunset provision for tax years starting January 1, 2026).
  • Like-Kind Exchange Gain Deferral – The Bill repeals like-kind exchange deferral rules except for real property.

Individual/Estate Changes

  • Personal Tax Rate – The Bill reduces the rates for five of the seven tax brackets.  The brackets are 10, 12, 22, 24, 32, 35, and 37 percent.  The 37% bracket applies to individuals with income over $500,000 ($600,000 for MFJ).
  • Individual Alternative Minimum Tax (AMT) – The corporate AMT has been retained but with higher exemption amounts and phase-out thresholds.
  • Personal Exemptions – The Bill repeals the deduction for personal exemptions.
  • Standard Deduction – The Bill doubles the standard deduction.
  • State/Local Taxes – For those itemizing, state/local property, income/sales taxes are limited to $10,000.
  • Mortgage Interest – The mortgage interest deduction for new mortgages incurred after 12/14/2017 is limited to interest on mortgages up to $750,000.  The Bill eliminates the deduction for interest on home equity loans.
  • Child Tax Credit – The Bill increases the child tax credit to $2,000 per child (of which $1,400 per child is refundable).
  • Estate Tax Exemption – The bill doubles the estate tax exemption.