Yesterday, the house passed The Tax Cuts and Jobs Act by vote of 227-205.
Highlights of the bill are as follows:
- Tax brackets of 12, 25 and 35% with a 39.6% rate for “high-income” taxpayers.
- The standard deduction is doubled ($12,700 for single taxpayers and $24,000 for married couples) while reducing certain itemized deductions such as:
- Home mortgage interest allowed on mortgages up to $500,000. For new mortgages and existing mortgages maintain deductible interest on up to $1,000,000.
- State and local property tax deductions are reduced to an annual total of $10,000.
- The alternative minimum tax is eliminated.
- The estate tax doubles the exempt amount passed to heir’s tax free and eliminating the tax entirely in 7 years.
- The maximum Corporate rate goes from 35% to 20% for C-Corporations.
- Income from certain “pass-through” entities such as S-Corporations and Partnerships, is reduced to 25% but pass-through income with restrictions on companies that provide services.
- Businesses will expand ability to fully deduct cost of new equipment.
- Small businesses can continue to write off loan interest.
This is just the House version of the legislation and is not yet law. The senate is advancing their own version of tax legislation and at some point, there will be a negotiated bill which will need to pass both the House and Senate.
Developments are happening daily and your professional team at Rackers & Fernandez will keep you apprised of the news as it happens.