A “unified framework” for tax reform has been released from the Trump Administration and select members of Congress. Although the document provides much detailed information it still leaves many specifics to be worked out by the House Ways and Means Committee and the Senate Finance Committee.
The table below shows a summary of the tax provisions mentioned in the agreed framework.
|Provision||What it means|
|Increased Standard Deduction||$24,000 for married taxpayers filing jointly, and $12,000 for single filers.|
|Lower Rates for Individuals and Families||The framework shrinks the current seven tax brackets into three- 12%, 25%, and 35%- with the potential for an additional top rate for the highest income taxpayers to ensure that the wealthy do not contribute a lower share of taxes paid than they do today.|
|Enhanced Child Tax Credit||The framework states that it “significantly increases” the child tax credit and the required income levels to qualify, but does not specify the amounts.|
|Eliminates Loopholes for the Wealthy, Protects Bedrock Provisions for Middle Class||To provide simplicity and fairness, many itemized deductions used by the wealthy are eliminated, but retains tax incentives for home mortgage interest and charitable contributions, as well as tax incentives for work, higher education, and retirement security.|
|Repeals Death Tax and Alternative Minimum Tax (AMT)||The framework repeals the unfair Death Tax and substantially simplifies the tax code by repealing the existing individual AMT, which requires taxpayers to do their taxes twice.|
|New Lower Tax Rate and Structure for Small Business||The framework limits the maximum tax rate for small and family-owned businesses conducted as sole proprietorships, partnerships, and S corporations to be 25%- significantly lower than the top rate that these businesses pay today.|
|Lower Corporate Tax Rate||So that America can compete on level playing field, the framework reduces the corporate tax rate to 20% – below the 22.5% average of the industrialized world.|
|Allows “Expensing” of Capital Investments||The framework allows business to immediately write off (or expense) the cost of new investments in depreciable assets (other than structures) that are made after September 27, 2017, for at least five years.|
|Moving to an American Model for Competitiveness||Prevents the incentive to offshore jobs and keep foreign profits overseas. The framework would provide for 100% exemption for dividends from foreign subsidiaries, defined as companies in which the U.S. parent owns “at least 10% stake.” This helps level the playing field for American companies and workers.|
|Bringing Profits Home||The framework brings home profits by imposing a one-time, low tax rate on wealth that has already accumulated overseas so there is not tax incentive to keeping the money offshore.|
What’s next? The most important thing to keep in mind is that the released tax reform is as a framework, not a finished product. Kevin Brady, chairman of the tax-writing House of Representatives Ways and Means Committee, said his plan was to turn the framework into legislation to be passed by the end of the year.
This is a reminder that we are always available to go over any end-of-year tax planning strategies. Please contact us if you’d like to know how this may affect your taxes for 2017.