The 2017 Tax Cut and Jobs Act was enacted on December 22, 2017. This Act was the most comprehensive Federal tax change since 1986, affecting individuals and all types of business entities, both large and small. With limited exceptions, the Act’s provisions start with the 2018 tax year.
Some highlights of the Act include:
- Lowering the top individual tax rate from 39.6% to 37%, and all other tax rates have been decreased.
- Personal exemptions are repealed.
- Doubling the standard deduction, while limiting or eliminating many itemized deductions, and eliminating the personal exemption.
- All itemized deductions that were subject to the 2% adjusted gross income threshold have been repealed.
- Child tax credit has been expanded.
- Increasing the Alternative Minimum Tax (AMT) exclusion for individuals.
- Section 529 plans will be expanded to include to pay elementary and secondary school tuition.
- Doubling the lifetime gift and estate tax exclusion.
- Lowering the top corporate tax rate from 35% to 21%.
- Expenses paid for entertainment activities, membership dues, and transportation and commuting expenses of employees will no longer be deductible.
- For manufacturers, the domestic production activities deduction (DPAD) for expenses related to the production of items made in the U.S. has been repealed.
- Expanding immediate write-off of equipment purchases for businesses.
- A complex 20% deduction for net income for pass-through businesses (sole proprietors, LLC’s, and S corporations).
- Corporations with foreign subsidiaries must pay a tax (reduced rate) on their previously undistributed foreign earnings. Going forward, these corporations will not be taxed on their foreign subsidiary income.
- The corporate alternative minimum tax (AMT) has been repealed.
- Manufacturing businesses will no longer be able to deduct 9% of their net manufacturing income of items produced in the U.S.
The new tax bill is very complex and lengthy. As a result, you may need professional advice for your individual or business tax situation for 2018 and subsequent years. If you have any questions, please contact us to review your specific situation.
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