U.S. Congress Passes Tax Reform Bill
The U.S. House and Senate have passed the first major tax reform bill since the Reagan administration, and the legislation is now set to go to President Trump’s desk to be signed into law. Elements of the bill go into effect as early as 2018, although others don’t come into play until 2019 or later.
New tax brackets go into effect January 1, 2018, ranging from 10 percent to 37 percent, and the Internal Revenue Service announced that it expects to issue initial withholding guidance in January reflecting the new legislation, which would allow taxpayers to begin seeing the benefits of the change as early as February. The change in the standard deduction, $6,350 for individuals and $12,700 for married couples, to $12,000 for individuals and $24,000 for married couples, won’t impact households until their 2019 filings, however.
The bill includes several significant changes for businesses and corporations, including reducing the tax burden on pass-through businesses and cutting the corporate tax rate from 35 percent to 21 percent. It also repeals the alternative minimum tax for corporations. While some of the individual tax cuts expire in 2025, the changes to the corporate tax rate are permanent.
The Small Business Legislative Council (SBLC), upon whose board PPAI President and CEO Paul Bellantone, CAE, sits, sent a letter last week to members of the conference committee reconciling the House and Senate versions of the bill. Its preliminary analysis of the final bill finds many of the changes it sought in its outreach to be included, such as: trusts and estates are now entitled to use the pass-through deduction, pass-throughs are entitled to take advantage of the state and local income tax and property tax deduction, the cut off for allowing 100 percent deduction of business interest and cash method of accounting went with the higher $25 million threshold and the step up in basis for inheritance taxes was maintained.