Today we're talking taxes and there are a number of bills that are being voted
on right now, even as we speak. So the House of Representatives, on Tuesday
November 2nd, introduced a new tax bill. The biggest change since 1986 by the way.
They voted on it on Thursday on November 16th and they passed it. So let's go over
what's in this bill because this will affect your taxes going forward.
So first of all right off the bat, the individual tax brackets. Instead of seven brackets
there's four brackets and those four brackets are 12% 25% 35% and 39.6%
which is actually the same as the highest bracket right now the standard deduction
almost doubles, so for single taxpayer it's about $12,000 for a married
taxpayer it's about $24,000. But the exemption of
about $4,000 per person, that goes away. So if you've got a family with a lot of
kids, you may not do as well with this new tax act. Then you look at child
credit right now it's $1,000 per kid, it would go up to about $1,600 per kid, but
then here's where there's a lot of discussion. There's a lot of the
deductions that we've come to like and enjoy and to reduce our taxes a lot of
those are going away. For example, medical deductions would go away completely with
this House bill and that means you can't deduct your medical expenses if you have
a year where you're sick. Or let's say you're retired and in a long-term care
facility right now you can deduct those premiums this under this bill you cannot
detect the premiums. State and local taxes, this is a big one, so the state and
local tax deduction would go away and that's a big deal if you live in
California or New Jersey, New York, states that have high taxes. So interestingly
enough if you live in California, without this deduction you're and and you're in
the highest tax bracket your taxes are actually going up with this tax bill.
So be aware of that. Property taxes they're allowing you to deduct about ten
thousand dollars no more than that because right now it's unlimited.
Mortgage interest is another big one because right now you can ahead you can
borrow up to a million dollars and deduct that interest on your return.
This would change now to $500,000 and you can deduct the interest only on that
much. If you borrow more than that you have an allocation some is deductible
some is not deductible. And then your home your home equity loan you could write
now you can borrow a hundred thousand dollars and take that deduction and
they're changing that to where you cannot take any deduction on that.
So be aware of that. Charitable contributions stay the same so that's a good thing.
Casualty losses go away. Unreimbursed business expenses go away. So if your
employee may be in sales and you've got a lot of expenses that you don't get
reimbursed on, currently you can deduct those under this new tax bill you cannot
deduct them. Gain on sale of the principal residence, so right now if you
have a principal residence and you have a gain if you're single you can you can
exclude two hundred fifty thousand dollars of gain, five hundred thousand if
you're married. That would stay the same, but instead of living in a home two out
of five years now, it is five out of eight years. In other words, it has to be
your residence for five years out of the last eight years when you sell it.
So that's gonna still be a great benefit, but not as good as it is because
it'll take eight years, or five years to get there. Estate taxes these will be
repealed starting in 2024. If you have a lot of assets passing out of the next
generation there would be no estate taxes starting in 2024. Right now it's
about fifty five hundred dollar exemption per person. This bill would
temporarily raise that to ten million dollars per person
and married couple twenty million dollars. So there still would be estate taxes for
the next few years but then eventually they would go away.
Alternative minimum tax would be repealed so we don't have to worry about AMT, all that sort of
planning. And then a couple more quick things. The corporate tax rate would go
from thirty five percent to twenty percent. The idea there is so corporations
can keep more of their profits so they can expand more, they can hire
more people, they can improve the economy. And finally the small business tax rate
would actually go down a little bit, although not as much as you might think.
It would go down to twenty-five percent, but then there's this weird allocation
some of the gain some of your profit would be taxed at twenty-five percent
and some would be taxed at your ordinary income rate. That's a quick summary of
the House bill. We're still a long way from new tax reform and
realize that all these things would take effect in 2018, but first the Senate
has to pass their own version of the bill and if they do, then these two bills
need to be reconciled. Passed by both chambers and then the president would
have to sign it. So stay tuned we'll see if this actually happens but for you
guys right now, any if this does happen there'd be a lot of changes in 2018.
2017 will be an ideal time to do tax planning because some of the strategies that are
available right now, will go away and you'll want to take advantage of them in
2017. So give our office a call for a free assessment and we will show you
what those strategies are.