Congress is moving fast through the process of changing our tax code, and there are a lot of details to understand. Now, there are still lots of details to be ironed out, but let’s look at some of the key provisions of the proposals:
One of the major provisions won’t probably directly affect most listeners of this podcast: a cut to the corporate tax rate. But there is also a proposal to cap the tax rate on pass-through business entity – this means small businesses. Many of us own small businesses, including John and Devin. This may reduce the amount of taxes paid by small businesses.
There are also many parts of the proposals that will impact individuals.
Both versions of this bill include lower income tax rates, and an increase in the amount of money you can make in each tax bracket.
Both proposals increase the standard deduction but eliminate personal exemptions. How this will impact you depends on your individual situation, including family size and whether you currently itemize deductions.
In an attempt to simplify the tax code, the plans eliminate many of the itemized deductions. Depending on which plan you look at, different deductions are kept or removed. Both plans keep the charitable contributions deduction, retirement savings, and property tax deduction. The mortgage interest deduction may have a lower cap on the amount you can deduct. Deductions that may be eliminated include the state and local income and sales tax deduction, medical expenses deduction and educational expense deductions.
Both plans include some increase in the child tax credit, and increase the number of folks who can take the credits by increasing the income limits for the credit.
Both plans also repeal Alternative Minimum Tax, that alternative tax calculation that makes larger tax bills for so many people.
- How the standard deduction actually works
- Why the medical expense deductions impacts older folks more
- The impact on the estate tax and generation-skipping transfer tax
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