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SMALL BUSINESS NEWS

Nov 2017

 

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Senate Tax Cuts and Jobs Act

 On Thursday, 9 November, 2017 the Senate published itís version of the Tax Cuts and Jobs Act.  While there are some similarities to the House plan there are many differences

PERSONAL TAXES:

Personal Tax Brackets:  Personal tax brackets will range from 10% to 38.5%.  Those making under $9,525 will pay nothing.  Those making $500,000 or more will pay the high rate of 38.5%.



Single Head of Household Joint
10.0% > $0           10.0% > $0           10.0% > $0          
12.0% > $9,525 12.0% > $13,600 12.0% > $19,050
22.5% > $38,700 22.5% > $51,800 22.5% > $77,400
25.0% > $60,000 25.0% > $60,000 25.0% > $120,000
32.5% > $170,000               32.5% > $170,000    32.5% > $290,000    
35.0% > $200,000               35.0% > $200,000   35.0% > $390,000    
38.5% > $500,000 38.5% > $500,000 38.5% > $1,000,000

Deductions:

 

Deductions Kept:

-Charitable Deduction

 

Deductions Eliminated:

-Equity Debt Deduction

-State and Local Tax Deduction (except for businesses)

-Deductions for personal exemptions

-Deduction for taxes not paid or accrued in a trade or business

-Deduction for tax preparation expenses

-Deductions for bicycle commuting expenses

-Deductions for moving expenses

-Overall limitations on itemised deductions

-Mortgage Interest Deduction

-Eliminates the additional standard deduction and the personal exemption.

 

Standard Deductions:  The standard deductions match the House plan for Single and filing Jointly.

 

Single:  $12,000

Head of Household:$18,000

Filing Jointly:$24,000

Child Tax Credit:

The child tax credit was increased from $1,000 to $1,650.  The first $1,000 would be refundable, increasing with inflation up to the $1,650 base.  The phaseout threshold will  dramatically increase from $110,000 to $1 million for married filers.

The Alternative Minimum Tax (AMT):

The AMT is eliminated.

Estate Tax:

Raises the estate tax exemption to $11,200,000 from $5,600,000.

 

BUSINESS TAXES:

Corporate Tax Rate:

The Senate lowers the Corporate tax rate to 20%.  However, they want to delay it until 2019.

Accounting:

Permits the use of the cash method of accounting for businesses with gross receipts of up to $15 million.

Capital Investing:

Full expensing is allowed for short-lived capital investment on equipment and machinery for five years.  Increases Section 179 expensing from $500,000 to $1,000,000.  Increases the phaseout threshold from $2,000,000 to $2,500,000.  Reduces asset lives for residential and nonresidential real property to 25 years.

Expensing:

Temporary 100-percent expensing for certain business assets.  The proposal extends and modifies the additional first-year depreciation deduction through 2022.

Deductions:

-Interest:

Limits the deductibility of net interest expense on future loans to 30 percent of earnings before interest and taxes (EBIT).

 

-Domestic Production:

Eliminates the domestic production activities deduction (section 199) and modifies the rehabilitation credit and orphan drug credit.

 

-FDIC:

Limits the deduction for FDIC premiums.  No deductions for taxpayers with total consolidated assets of $50 billion or more.

Net Operating Loss (NOL):

Eliminates Net Operating Loss (NOL) carrybacks and limits carryforwards to 90 percent of taxable income.

The Alternative Minimum Tax (AMT):

The AMT is eliminated.

International Income:

Moves to a territorial system.  This means that income earned overseas will not be double taxed.

Repatriation:

Cuts repatriation to 10% for cash and cash-equivalent profits and 5% for reinvested foreign earnings.

The next step for this plan is for it to go to the floor for a vote by all members of the Senate.

 

Sources:
Senate Tax Cuts and Jobs Act


By Bill Williams

 

 

 

 

 

 

 

 

 

 
 

 

  
 

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