Thursday, December 21, 2017

Trump GOP Tax Plan, Cuts and Changes in 2017, 2018 and Beyond- Latest Updates and Final Bill

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Trump GOP Tax Plan, Cuts and Changes in 2017, 2018 and Beyond- Latest Updates and Final Bill


1.      Estate and Death Tax: - Doubles the exemption for the estate tax, but estate (or death) tax remains in place.

2.      Alternative Minimum Tax (AMT):- Senate provision generally adopted by eliminating the corporate alternative minimum tax, but keeps individual AMT. The individual AMT income exemption threshold will be raised to reduce the number of tax payers subject to this tax

Filing Status
AMT Exemption Amount
Excess Taxable Income Rate of 28% (AMTI)
AMT Phase-out Income Level
2018 AMT Thresholds and Exemptions by Filing Status
Single
$55,400
$191,500
$123,100
Joint Returns or Surviving Spouses
$86,200
$191,500
$164,100
Married Individuals Filing Separate Returns
$43,100
$95,750
$82,050
Estates and Trusts
$24,600
$191,500
$82,050
2017 AMT Thresholds and Exemptions by Filing Status
Single
$54,300
$187,800
$120,700
Joint Returns or Surviving Spouses
$84,500
$187,800
$160,900
Married Individuals Filing Separate Returns
$42,250
$93,900
$80,450
Estates and Trusts
$24,100
$187,800
$80,450


3.      Tax Brackets & Rates:- Maintains 7 individual tax rate brackets - 10%, 12%, 22%, 24%, 32%, 35% and 37 % - which will start in tax year 2018 and expire by the end of 2025. The top rate is a 2.6% fall from the current top rate of 39.6% and raises income thresholds to over $500,000/$600,000 (single/married)

2018 Income Tax Brackets and Rates under Trump GOP Tax bill

Tax Rate
Single Filers
Married Filing Jointly
Married, filing separately
Head of Household
10%
Up to $9,525
Up to $19,050
Up to $9,525
Up to $13,600
12%
$9,526 to $38,700
$19,051 to $77,400
$9,526 to $38,700
$13,601 to $51,800
22%
$38,701 to $82,500
$77,401 to $165,000
$38,701 to $$82,500
$51,801 to $82,500
24%
$82,501 to $157,500
$165,001 to $315,000
$82,501 to $157,500
$82,501 to $157,500
32%
$157,501 to $200,000
$315,001 to $400,000
$157,501 to $200,000
$157,501 to $200,000
35%
$200,001 to $500,000
$400,001 to $600,000
$200,001 to $300,000
$200,001 to $500,000
37%
$500,000+
$600,000+
$300,000+
$500,000+

The standard deduction in 2018 will double to $12,000/$24,000 (single/married) under the GOP tax bill. The $4,150 personal exemption will be fully eliminated for 2018.


4.       Itemized Credits and Deductions:- Retains tax breaks for charitable donations, child and dependent care credit, education relief, and Medical & long-term care expenses deductions (lowers threshold back to 7.5% for next 2 years, before going back to 10% from 2020)




Filing Status
Adjusted gross income (AGI) Pease Limitation for Claiming Itemized Deductions
Year -
2018
2017
Single Filer
$266,700
$261,500
Married Filing/Joint Return
$320,000
$313,800
Heads of Households
$293,350
$287,650
Married Individuals Filing Separate Returns
$160,000
$156,900
5.      Small Business Taxes: - 20% business income deduction for the first $315,000 in income earned by pass-through businesses. The first $75,000 of pass through income would be subject to an 8% tax rate

6.      Standard Deduction and Personal Exemption: - Standard deductions doubled to $24,000/$12,000 (married/single filers). Elimination of personal exemption until 2025

7.      Earned Income Tax Credit (EITC):- EITC will remain unchanged


8.      Obamacare Penalty: - Incorporates Senate provision for individual mandate repeal beginning in 2019. Would still be in effect for nein the final bill, Saves $330 billion, but CBO estimates 13 million Americans would be uninsured in 10 years as a result

9.      Capital Gains: - No changes to current CGT structure. Exclude controversial first in first out stock sales change to appease investment groups who strongly opposed this rule

10.  Social Security:- No changes to treatment of social security income

11.  401(k) Retirement Plans:- No change to retirement plan thresholds or tax deductibility

12.  Corporate Taxes: - Cuts corporate tax rate to 21% from the current 35% rate. Change would take effect from 2018

13.  Child Tax Credit (CTC):- CTC is key provision for selling tax reform to middle to lower income families. Senate provisions to double to $2,000 per child from $1,000 were adopted. However will have income and deductibility restrictions whereby it would only be refundable up to $1,400 and start to phase out at $400,000 in income. This increase would expire by 2025

14.  Reduced Itemized Credits and Deductions: - Mortgage interest deduction for existing homeowners will remain in place ($1 Million). For new homes, taxpayers will only be able to deduct interest on up to $750,000 in mortgage debt

15.  Eliminated Itemized Credits and Deductions: - Senate provision adopted to limit state and local property taxes (SALT) deductions to $10,000 in on tax payer's federal IRS returns. Final bill also has several provisions that eliminate a slew of tax breaks such as deductions for moving expenses and tax preparation costs

16.  Global & International Taxes: - Eliminates double taxation of foreign income and moves US to a territorial system in line with other western countries. Also has a higher one time repatriation tax rate than Senate and House bills where companies would pay 15.5% on cash assets and 8% on non-cash assets