written by Jacque Mattson
Tax writers in Congress have begun debating and writing tax reform legislation. On September 27, the White House and GOP leaders in Congress released a framework for tax reform, leaving much of the details to be determined by the House Way and Means Committee and the Senate Finance Committee. How quickly the new tax legislation can be written and passed is uncertain; however, it is certain that this is a top issue on Congress’ Fall agenda.
Individuals and Family Incentives
The GOP framework proposes turn the current seven individual tax rates into three rates of 12, 25, and 35 percent; however, there is the possibility that an additional top tax rate could be added “to the highest income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers.”
The GOP framework also proposes to:
- Eliminate the alternative minimum tax
- Approximately double the standard deduction
- Repeal the federal estate tax
- Eliminate most itemized deductions
- Retain the home mortgage interest deduction and deduction for charitable contributions
- Repeal the personal exemption for dependents
- Retain tax benefits that encourage work, higher education, and retirement security.
The GOP framework still includes several incentives for families including the possibility of creating a new non-refundable credit for non-child dependents and increasing the phase out income for the child tax credit.
Another part of the GOP framework is a corporate tax rate cut from the current 35 percent rate to a 20 percent tax rate. Businesses which operate as a passthrough entity, such as S-corporations and partnerships, would have a maximum tax rate at the shareholder level, subject to various limitations to avoid abuse.
The GOP framework also proposes:
- Enhanced expensing
- Eliminating the domestic manufacturing deduction
- Limiting the deduction for net interest expenses by C-corporations
- Safeguarding the research and development credit and tax preferences for low-income housing
- Changing various international taxation rules.
Many temporary tax incentives have expired, and unless they are extended, these incentives will not be available to taxpayers when they file their 2017 tax returns in 2018. These extenders include: mortgage insurance premium deduction, higher education tuition deduction, and tax exclusion for canceled mortgage debt.
Please contact our office if you have any questions about tax reform or the extenders 417-881-0145.