Proposed Tax Reform Details Released
Proposed Tax Reform Details Released
This morning, the House Ways and Means Committee released the details of their proposed tax reform plan for 2018 taxes and beyond. While this plan is in the early stages and will likely be subject to many adjustments and changes before it becomes law, we wanted to summarize some of the important proposed changes that might affect you.
- Tax rates will change from a minimum of 10% to 12% and there is no proposed change to the highest rate of 39.6%. However, individual tax brackets will be adjusted up so more of your taxable income may be taxed at a lower rate in comparison to current rates
- Standard deduction would roughly double
- Itemized deductions would only be allowed for property taxes (up to $10,000), charitable contributions, and qualified mortgage interest
- Mortgage interest on existing mortgages would be preserved, but new mortgages would be limited to mortgage values of $500,000 or less, and only on your primary residence (no HELOC deductions)
- No deduction for medical expenses, individual state and local income taxes, sales taxes, professional advisory fees, or unreimbursed employee expenses
- No changes to current 401(k) and IRA deduction limits
- Expands the child tax credit to include non-child dependents and taxpayers, increases the amount to $1,600 for children and $300 for non-children and taxpayers, and increases the phase-out income thresholds so more taxpayers will qualify
- No exemption deductions based on the number of dependents claimed (rolled into the changes to the child tax credit)
- Alimony would no longer be deductible to the payer or included in the income of the payee
- The holding period for the exclusion of gain from the sale of your principal residence is increased from 2 out of the last 5 years to 5 out of the last 8 years and the exclusion would be phased out for higher incomes (over $500,000 for married couples)
- Alternative minimum tax would be repealed
- Adoption credit would be repealed
- Qualified moving expense reimbursements from an employer would be taxable to the employee, and there would be no deduction for moving expenses
- Estate tax exemption would be doubled starting in 2018, and estate taxes would be fully repealed after six years
- College tax credits would be combined into one credit
- No deduction for student loan interest
- Certain pass-through business entities would be taxed at a flat 25% rate on a portion of their income
- Corporations would be taxed at a flat 20% rate and personal service corporations would be subject to a flat 25% corporate tax rate
The proposed law affects many additional tax areas that are not covered here (including major changes to business taxes). Please keep in mind that this proposal is likely to go through many changes before it becomes law. Please contact us if you have any questions about how the current proposal would affect your taxes.