How Does The 2017 Tax Plan Affect You

Last week, the U.S. House of Representatives’ Committee on Ways and Means introduced the 2017 Tax Cuts and Jobs Act. There will be a lot of discussions over the provisions in the bill in the upcoming weeks, and I expect changes along the way.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

Here are some of the highlights of the 2017 tax plan:

• Consolidate the seven current individual tax brackets into four at 12%, 25%, 35%, and 39.6%, using the following tax brackets:

• Increase the standard deduction:
• Joint filers: from $12,700 to $24,000
• Single filers (and surviving spouse): $6,300 to $12,000
• Eliminate personal exemption of $4,050 for each person;
• Eliminate itemized deductions except for mortgage interest deductions, charitable contribution deductions, and property tax deductions of up to $10,000. All medical expenses and other state and local tax deductions are eliminated;
• For new home purchases, mortgage interest deductions would be limited to interest on $500,000. What? That will affect home buyers in large cities where houses cost more than $500,000;
• Since state tax deductions will be eliminated, taxpayers in high-tax states will be greatly affected;
• Increase the child tax credit to $1,600, and add a nonrefundable credit of $300 for non-child dependents and a new nonrefundable $300 personal credit;
• Eliminate the alternative minimum tax (AMT) for individuals and corporations;
• Lower the corporate tax rate to 20%, and create a 35% maximum rate on pass-through business income (like LLC, partnership and S-corporation); and
• Increase the estate tax exemption to $10 million, and repeal the estate tax after six years.

How does this affect you?

• The Tax Policy Center said that Trump’s tax plan wouldincrease the national debt by $7 trillion over the next 10 years;
• Reduce U.S. gross domestic productafter 2024. The interest payment on the debt would consume a large portion of the federal budget. That money wouldn’t be available to build infrastructure or other job-creation uses;
• Trump’s tax reform plan would help the wealthy more than the middle class. The top 1 percent would get an 8.5 percent break. This favoritism to the wealthyis why Trump’s tax plan increases the debt so much. The most affluent Americans contribute the lion’s share to total tax revenues;
• No tax benefit to more than a third of taxpayers already have incomes that fall below their standard deduction and personal exemptions.

That’s all for now – I will give you the latest update as it develops.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.