On Friday the joint conference finalized the new tax bill. The new bill is over 1,000 pages. The bill will be sent to Congress for a vote early this week and if passed will be signed by the President this week. With Senators Rubio and Croker now in support of the bill it looks like it will pass and be enacted by the end of the year. This tax bill will be the largest tax bill passed since 1986. Last minute changes include an inclusion of real estate income in the qualified pass-through deduction of up to 20 percent; an increase of the refundable portion of the child credit to $1,400; and combined state and local tax deduction will be limited to $10,000 on individual tax returns.
Some of the highlights are as follows: (not all inclusive and not fully explained)
- Tax Rates:
- Individuals- tax brackets: 7 brackets 10%, 12%, 22%, 24%, 32%, 35%, 37%
- Capital gains and qualified dividends remain at a top rate of 20%
- Top corporate tax rate reduced to 21%
- Elimination of personal exemption
- Standard deduction has been effectively doubled
- Alternative Minimum Tax:
- Eliminates corporate alternative minimum tax
- Individual alternative minimum tax exemption increased to $500k for individuals, $1 million for couples filing jointly
- Deduction from pass-through income capped at 20% of qualified business income
- Qualified business income is domestic business income
- The deduction has a wage limitation that may reduce the deduction
- Large Specified Service Business will not be entitled to the deduction
- Real Estate entities will be allowed the 20% deduction
- The section 179 expense has been increased to $1,000,000
- Bonus depreciation has been retained and now includes used property
- Business interest expense limitation on companies with gross receipts over $15 million
- Generally limited to the sum of interest income and 30 % of taxable income. The disallowed portion is carried forward indefinitely
- NOL deduction limited to 80% of taxable income
- Penalty eliminated for the ACA individual mandate
- Enhance disaster relief for 2016 and 2017 disasters
- Miscellaneous itemized deductions are suspended and the overall limitation on itemized deductions is eliminated
- Mortgage interest deduction capped at $750k of mortgage indebtedness, down from $1 million under current law
- Home equity interest has been eliminated
- State and local tax deduction capped at $10,000 combined from any/all categories (property/income/sales taxes)
- Medical expense deduction is preserved. It allows Americans to deduct medical expenses not covered by insurance that exceed 7.5% of adjusted gross income.
- Alimony payment deduction is repealed. A recipient would not have to pick up income.
- Moving expense deduction is suspended
- Child tax credit preserved. Expanded from $1,000 to $2,000 and refundable up to $1,400. Phase out increased to AGI of $400,000.
- The unified estate and gift tax exemption increased to $11.2 million per person