US Tax Accountant Explains Tax Reform Update
VANCOUVER, BC–(Marketwired – December 20, 2017) – As the founder of US Tax Professionals, it’s an exciting time for Mark Schiffer and his team. The Tax Cuts and Jobs Bill (H.R. 1), passed on November 16th, is the first significant tax reform effort undertaken by Congress in more than 30 years. If the proposed reform, which could still change, becomes legislation, everyone from individual taxpayers to business owners and educational institutions will be impacted.
In his latest blog, Mark provides an overview of the impact this will have on businesses and individuals. For more, go to: https://www.us-taxprofessionals.com/newsletter.php
For individuals, the proposed reform reduces the number of tax brackets from seven to four: 12%, 25%, 35% and 39.6%, and the following tax will rates apply:
- 12% up to $45,000
- 25% up to $200,000
- 35% up to $500,000 and
- 39.6% over $500,000
Married couples filing jointly, will be expected to pay:
- 12% up to $90,000
- 25% up to $260,000
- 35% up to $1 million
- 39.6% over $1 million
The standard deduction increases from $6,350 (2017) to $12,000 for individuals and from $12,700 (2017) to $24,000 for married couples. However, the deduction for personal exemptions is repealed.
The Child Tax Credit will increase from the current $1,000 to $2,000. An additional $500 credit will be provided for each non-child dependent. Also, Social Security numbers for children will be required before claiming the enhanced credit.
The AMT remains but with increased threshold amounts, affecting fewer taxpayers. For Capital Gains and Dividends, the maximum tax rate remains at 23.8% (20% plus the 3.8% Medicare tax for taxpayers with income above $200,000 or $250,000 for those married and filing jointly).
The exemption on the Estate Tax, currently $5.5 million, immediately doubles to $11.2 million and remains at this level for the next six years, after which time the estate tax will be eliminated completely in the year 2025 and beyond.
All Education Tax Credits, Coverdell plans (Section 530 Program) are eliminated and 529 Savings Plans are expanded to allow some funds to be used for K-12 education. Rollovers to Achieving a Better Life Experience (ABLE) Sec. 529A accounts will be allowed as well.
Mortgage Interest Deductions remain but with a few changes, such as allowing interest deduction for up to $500,000 (currently $1 million) in mortgage principal on new homes. Existing mortgages will be grandfathered in.
State and Local Income Tax Deduction will be preserved. Deductions will be allowed for up to $10,000 a year in state and local property taxes. However, taxpayers would no longer be able to deduct state and local income or sales taxes.
All deductions for charitable donations and contributions remain.
The Medical expense deduction (currently 10% of AGI) is temporarily lowered to 7.5% of income for tax years 2017 and 2018.
The Student Loan Interest Deduction will be repealed. Many other miscellaneous deductions are also repealed, including those relating to tax preparation, alimony payments, and moving expenses with the exception of the moving expense reimbursement for members of the Armed Forces on active duty who move because of a military order.
The Adoption Tax Credit remains. However, the $7,500 tax credit for the purchase of electric vehicles is eliminated.
For businesses, the Corporate Tax Rate is reduced from 35% to 20%.
Companies with offshore earnings (Territorial Taxation), currently taxed at a 35% rate, would transition to a territorial tax system. Under the tax reform bill, income derived from offshore earnings (if repatriated) would be subject to an effective tax rate of 14% for earnings held in liquid assets and 7% for non-liquid assets.
Small businesses will retain the ability to write off interest on loans, and all businesses would be allowed to immediately write off the full cost of new equipment. However, the deduction for business entertainment expenses is eliminated.
The tax rate on pass-through business entities is reduced to a maximum of 25%. Furthermore, a 9% tax rate (vs. the 12% tax rate currently in place) now applies for the first $75,000 ($37,500 for single filers and $56,250 for heads of household) in pass-through business income of an active owner or shareholder earning less than $150,000. The threshold amount is $75,000 for single filers and $112,500 for heads of household. This 9% rate applies to all businesses (subject to the $75,000 income ceiling) and is phased in at 11% for 2018 and 2019, 10% for 2020 and 2021 and 9% for the tax year of 2022 and beyond.
The Low-income Housing Tax Credit remains. The Research & Development Tax Credit remains. However, the Work Opportunity Tax Credit is repealed.
A 1.4% excise tax will be imposed on investment income derived from endowment funds at private schools (colleges and universities). An exclusion is provided for an institution whose endowment (fair market value) is less than $250,000 per student.
To learn more about how The Tax Cuts and Jobs Bill (H.R. 1) could impact you personally, contact US Tax Professionals at 604-949-1559.
About the Company
US Tax Professionals provide tax services for dual American and Canadian citizens in Vancouver. Founded in 2013, they specialize in taxation for US citizens and expats, taxation and accounting for business, cross-border taxation for US and Canadian citizens, as well as accounting and taxation of alternative investments, including private equity funds and hedge funds.
For more information, visit http://www.us-taxprofessionals.com/ or call (604) 949-1559.
US Tax Professionals
Company Website: http://www.us-taxprofessionals.com