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  • Tax Reform Bill Released

    Tax Reform Bill Released

    On Tuesday November 2, 2017 the GOP released “H.R. 1 Tax Cuts & Jobs Act”. The bill will make major changes to existing tax structure and law. The House Ways and Means Committee will begin reviewing the bill on Monday November 6 and will begin making amendments before passing it onto the full House of Representatives for a vote.

    Below is a summary of important changes that are included in the tax bill.

    Changes affecting Individuals

    • Five tax brackets:
      • 0% - Taxable income up to $12,000 for individuals; $24,000 for joint filers
      • 12% -  Taxable income up to $45,000 for individuals; $90,000 for joint filers
      • 25% - Taxable income up to $200,000 for individuals; $260,000 for joint filers
      • 35% - Taxable income up to $500,000 for individuals; $1 million for joint filers
      • 39.6% - Taxable income above $500,000 for individuals; above $1 million for joint filers
    • Standard deduction for individuals increases to $12,200; $24,400 for joint filers
    • Itemized deductions severely reduced:
      • Deductions allowed:
        • Charitable contributions
        • Home mortgage interest (capped at $500,000 for newly purchased homes)
        • State and local property taxes up to $10,000
      • Deductions eliminated:
        • Medical expenses
        • State and local income tax deduction (SALT)
    • No more personal exemptions
    • Child Tax Credit expanded to $1,600
      • Credit for “non-child dependent” of $300
      • Credit phased out for individuals with income beginning at  $115,000; joint filers with income beginning at $230,000
    • Estate Tax exemption is doubled to $11 million for individuals; $22 million for joint filers beginning January 1, 2018
      • Estate Tax is completely eliminated beginning January 1, 2024
    • Alternative Minimum Tax (AMT) is eliminated

    Changes affecting Businesses

    • Corporate tax reduced to a flat rate of 20%
    • Pass-through income from S-Corp’s and Partnerships will be taxed at a maximum rate of 25%
    • 100% Cost Recovery Deduction
      • Taxpayers can immediately expense 100% of the cost of qualified property acquired and placed in service after September 27, 2017 until January 1, 2023
      • Also applies to used equipment not previously used by the taxpayer
    • Code Sec. 179 Expenses
      • Increases to a limitation of $5 million from its current limitation of $500,000
      • Phase-out begins at $20 million compared to the current amount of $2 million
    • Businesses may use cash method of accounting as long as average gross receipts do not exceed $25 million (currently the threshold is $5 million)
    • Net Operating Loss can be carried forward indefinitely, but not carried back unless there is certain disaster or casualty loss
    • Eliminates business deductions for entertainment, amusement, or recreation activities
      • Includes facilities and any membership dues or fees that may be associated with the activity

    This is just a short summary of some of the notable changes under the new tax law. As this bill moves forward, so will the updates as to what is amended or added.

    Please feel free to contact us with any questions or concerns regarding the new tax bill.

    Very truly yours,

    Lytkowski & Co., Inc


    Dale Lytkowski | 11/02/2017