(See earlier article for the background of and provisions in the earlier versions.) According to the New York Times, here are some of the business-related parts of the bill the Senate-House conference committee has agreed on. Note: Before becoming law, the legislation must now be sent back to both the house and senate for approval. To become law, each chamber must past identical bills which then must be signed into law by the President.
Update below: Friday | 11.15.2017 | 11.45 p.m.
Corporate Tax | Agreement drops the corporate tax rate to 21 percent from the current 35 percent rate and will go into effect in 2018, rather than 2019, as the Senate bill originally called for.
State & Local Tax Deduction | Allows individuals to deduct up to $10,000 in state and local taxes, split between property taxes and either income or sales taxes paid.
Corporate Alternative Minimum Tax | Rescind the corporate alternative minimum tax tucked into the Senate bill at the last minute as a way to pay for the $1.5 trillion bill.
Individual Income Tax Rates | Top rates will drop to 37 percent, down from the current rate of 39.6 percent. Rate will kick in for income levels below the $1 million cutoff outlined previously in both the House and Senate bills.
Pass-through Companies | Negotiators agreed to keep the Senate’s approach to provide a tax deduction for pass-through companies, whose owners pay taxes on profits through the individual code. However, that deduction will likely be lower than the 23 percent deduction in the Senate-passed bill. The conference bill will include a House provision that would allow some pass-through owners with few employees — but large amounts of investment in their businesses — to bypass a limit on how much income qualifies for the preferential deduction.
Update: Friday | 11.15.2017 | 11.45 p.m.
According to Bloomberg, here are key changes to U.S. tax law for individuals and businesses that have emerged from the final Republican bill that’s headed for votes in the House and Senate.
Corporate Tax Rate
Current law: 35 percent
Proposed: 21 percent, beginning in 2018.
Individual State and Local Tax Deductions
Current law: Individuals can deduct the state and local taxes they pay, but the value is subject to certain limits for high earners.
Proposed: Individuals can deduct no more than $10,000 worth of the deductions, which could include a combination of property taxes and either sales or income taxes.
Obamacare Individual Mandate
Current law: An individual who fails to buy health insurance must pay penalties of $695 (higher for families) or 2.5 percent of their household income — whichever is higher, but capped at the national average cost of the most basic, low-premium, high-deductible plan.
Proposed: Repeal the penalties.
Mortgage Interest Deduction
Current law: Deductible mortgage interest is capped at loans of $1 million.
Proposed: Deductible mortgage interest for new purchases of homes would be capped at loans of $750,000.
Medical Expense Deduction
Current law: Qualified medical expenses that exceed 10 percent of the taxpayer’s adjusted gross income are deductible.
Proposed: Reduce the threshold to 7.5 percent of AGI for the tax years 2017 and 2018.
Child Tax Credit
Current law: A $1,000 credit for each child under 17. The credit begins phasing out for couples earning more than $110,000. The credit is at least partially refundable to qualified taxpayers who earned more than $3,000.
Proposed: Double the credit to $2,000 and provide it for each child under 18 through 2024. Raise the phase-out amount to $500,000, and cap the refundable portion at $1,400 in 2018.
Estate Tax (Also called “Death Tax”)
Current law: Applies a 40 percent levy on estates worth more than $5.49 million for individuals and $10.98 million for couples.
Proposed: Double the thresholds so the levy applies to fewer estates. The higher thresholds would sunset in 2026.
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