It seems we may be closer to revised tax law for the 2017 tax year. At this rate, floor votes may still happen prior to the holiday break. But rest assured that legislators will pore over the published tax bill before a vote.
The House & Senate Republican Conference Committee have agreed in principle to a consensus tax reform bill that reconciles the differences between the bills passed by the two legislative bodies. The main compromises are to lower the top corporate rate to 21% (instead of 35%), lower the top individual rate to 37% (instead of 39.6%) and scaling back some deductions, notably the state, local & property tax deduction to a maximum of $10,000 and limiting the home mortgage deduction to debt on $750,000 (instead of $1,000,000). Home equity indebtedness would be eliminated under the new bill and the standard deduction would be doubled from its current levels.
Also included in the new bill is the Senate provision to repeal the Obamacare individual mandate, the requirement for individuals to buy health insurance or face a tax penalty. The corporate alternative minimum tax would be repealed in its entirety while the individual alternative minimum tax would remain. However, the individual alternative minimum tax threshold would be adjusted to exclude any individual filers with income under $500,000 or joint filers with income under $1,000,000.
The new bill would double the current estate tax exemption level to $11.2 million, but does not repeal the estate tax completely. Pass through entities that conduct qualified business activities, such as S Corporations & partnerships, would get a preferred treatment under the new bill by providing a deduction of 20% of its qualified business income.
If you have questions regarding how this tax reform bill, if passed in its current form, could impact your individual or business tax situation compared to 2016, please contact the Tax Team at LvHJ.