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Republicans Announce Tax Reform Framework

By:  Amanda Wilson

After months of speculation, President Trump and the Republicans have finally announced their framework for tax reform.  While specific details are not known, the key elements of the framework include:

  • Reducing the corporate tax rate to 20% (current rate is 35%).
  • Providing for a 25% tax rate (current maximum rate for individuals is 39.6%) for income from small businesses owned as sole proprietorships, partnerships and S corporations.
  • Providing for individual tax bracket rates of 12%, 25%, and 35% (a change from the current 7 rates that go from 10% to 39.6%).
  • Repealing the estate tax and the generation skipping tax.
  • Repealing the individual alternative minimum tax.
  • Doubling the standard tax deduction to $12,000 for individuals and $24,000 for married couples.
  • Increasing the child tax credit.
  • Eliminating most itemized deductions for individuals (including deductions for state and local taxes).  There will still be tax incentives for mortgage interest and charitable contributions.
  • Limiting corporations ability to deduct interest.
  • Allowing corporations to expense the cost of new investments in depreciable assets other than structures for at least 5 years.
  • Repealing Section 199 deduction for domestic production.
  • Replacing the current tax system for U.S. companies operating abroad.  U.S. companies will receive a 100% exemption on dividends from related foreign subsidiaries.  Any existing accumulated foreign earnings will be treated as repatriated, with the corresponding tax spread out over several years.  Earnings held in illiquid assets will be subject to a lower tax rate than earnings held in cash or cash equivalents.

It should be noted that the reform proposal does not currently change the top tax rates for capital gains and dividends (20%) nor does it impact the Affordable Care Act’s 3.8% net investment income tax imposed on high earners.

 

 

 

WH: Trump Pushing for 15% Corporate Tax Rate and Repeal 3.8% NIIT

Magnifying Glass and Tax

By:  Amanda Wilson

The White House announced today that reducing the corporate income tax rate to 15% and repealing the 3.8 % net investment income tax are top priorities for tax reform.  The 3.8% NIIT was implemented as part of ACA/Obamacare and apply to passive income (e.g., interest, dividends, capital gains) received by high net worth individuals.

It is unclear whether President Trump will be more successful in tackling tax reform than he was in repealing ACA/Obamacare.  Stay tuned!

Ryan Says Tax Reform Coming, But Later This Year

Capitol buildingBy: Amanda Wilson

On Friday, House Speaker Ryan stated publicly that tax reform legislation will be included in one of two must pass budget resolutions this year, but it will be included in the fiscal 2018 budget resolution rather than in the earlier fiscal 2017 budget resolution.  So per Speaker Ryan, reform legislation is coming, but later in the year.

Speaker Ryan also stated that the Affordable Care Act repeal legislation will be included in the earlier fiscal 2017 budget resolution.

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