No doubt you are aware of the tax reform bill that passed Congress and was signed into law by President Trump in late December. You may be wondering what it means for you and your business. Below I share some highlights of the new law.
Overall, the changes cut taxes on corporations and individuals while simplifying various deductions. Some changes have immediate effects but expire after 2025 while others are permanent.
Key features of the new law for individuals include:
· There are still seven individual income tax brackets but they have been lowered to 10, 12, 22, 24, 32, 35, and 37 percent. The top rate used to be 39.6 percent.
· The standard deduction nearly doubles, personal exemptions go away, the child tax credit increases from $1,000 to $2,000 and a new credit has been added for non-child dependents in the household.
· The individual mandate to have health insurance expires AFTER 2018.
· State and local income, property, and sales taxes will still be deductible but will be limited to $10,000.
· The mortgage interest deduction will be limited for new home buyers.
· The individual alternative minimum tax has been eliminated for joint tax returns with incomes below $109,400 and individual taxpayers with income below $70,300.
Key features of the new law for corporations include:
· The corporate income tax rate will decrease from a maximum 35 percent to a flat rate of 21 percent.
· Companies will have the option to immediately expense all investments instead of spreading them out over several years. This provision expires in five years.
· With a few exceptions corporations will be limited in how much debt they can deduct.
· There will be a new 20 percent deduction of qualified business income for pass-through entities (LLC’s, partnerships and S Corporations).
· The corporate alternative minimum tax has been repealed.
Other provisions worth noting are a new tax of 1.4 percent on university endowments net investment income.
Staying informed is the best way to navigate these changes. I welcome opportunities to talk with you about this legislation’s details and how to help you plan ahead. If you would like to make an appointment, please contact me at jberman@