Tax Bill Update #1 (November 2017)

In the current version of the proposed bill, there are major points that, as usual, some will love, and some will hate. The bill originated in the House of Representatives and it’s just the first draft. It is important to remember that the proposed legislation will be sent to committee for debate as they consider changes and revision. House members are confident that their version will be revised and pass fairly quickly. The Senate will then need to write their own version of the bill. It is expected that the Senate bill will be similar to the version in the House, but may experience more difficulty getting passed. If both the House and Senate pass their versions of the bill, they will work together to reconcile the bill before final passage into law.
 
That said, let’s review some of the major points of the current House bill:

* Individual tax brackets go from 7 to 4
 
* The Standard Deduction is nearly doubled, BUT
 
* Personal Exemptions are ELIMINATED. This offsets some of the advantage of the increased standard deduction, BUT
 
* Certain credits are increased (enhanced child tax credit & a new credit for non-child dependents), somewhat offsetting the disadvantage to families losing multiple personal exemptions.
 
* Many itemized deductions are ELIMINATED
 
* The AMT is ELIMINATED (It’s about time!)
 
* The Student loan interest deduction is ELIMINATED
 
* The Educator expense deduction is ELIMINATED
 
* Alimony tax treatment is changed
 
* The Primary Residence Gain Exclusion is significantly
LIMITED
 
* Corporate tax rates are REDUCED significantly
 
* Pass through (think S-Corps and Partnerships) tax rates are REDUCED on SOME shareholders – (This one is a partial reduction for some shareholders in certain industries. It is likely to change significantly before passage.)
 
* Potentially Retroactive - (There have been calls for making the bill retroactive to 01/01/17 but recent remarks by the administration make this seem unlikely.)
 
These are highlights of a 400+ page bill and it’s obviously not intended to be a full review. Expect major changes if it becomes law. We’ll keep an eye on the bill as it works its way through Congress.
 
Please feel free to reach out if you have any specific questions or concerns about how the bill may relate to your personal tax situation.

This is general information and a brief summarization of complicated tax issues which are often subject to many exclusions and limitations. We make every effort to verify the accuracy of all information but we do not guarantee or warranty advice disseminated over the internet. Please give us a call to discuss potential strategies and ensure they make sense for your specific situation.