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The Tax Cuts and Jobs Act

The House of Representatives and the Senate both voted to pass the sweeping Tax Bill. The tax bill slashes tax rates for corporations, provides tax breaks for private individuals and is the first large reorganization of the tax code since the 1986 Tax Act.  The tax act is scheduled to be signed by the President on Wednesday December 20th.

Some of the Key provisions – unless stated, all are effective starting in 2018

                The new bill lowers the corporate tax rate from 35 to 21 percent

                The bill keeps seven tax brackets while reducing the rates for five of them

                                Rates of 10, 12, 22, 24, 32, 35 and 37

                Starting in 2019, the Affordable Care Act’s individual mandate is eliminated

                The AMT remains for individuals, but the exemption is raised

                                $500,000 for singles

                                $1,000,000 for couples

                The corporate AMT is eliminated

                $2,000 credit for each qualifying child under age 17. The credit is fully refundable up to $1,400

                The estate tax rate remains at 40%, but doubles the exemption for singles and couples

                State & local taxes, sales taxes and real estate taxes are limited, in total, to a $10,000 deduction

                Interest deductions on new mortgages are limited to Interest on mortgages up to $750,000

                Medical deductions that exceed 7.5% of adjusted gross income remain deductible

                Student loan interest remains deductible

                Pass-through business are allowed a deduction of 20% on the first $315,000 of joint income

On a side note – The House of Representatives had to vote twice to approve the bill due to parliamentary procedures. Three minor drafting errors had to be corrected.  The only correction to mention relates to the name.  The name of the bill had to be changed to    “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”  We will continue to call the bill the “Tax Cuts and Jobs Act” for simplicity. 

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