On December 20th, Congress passed the Tax Cuts and Jobs Act. The bill amends the IRC to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. The bill includes reductions in corporate tax rates and a repeal of the Affordable Care Act (ACA) individual mandate. This is very big new and the outcome of the bill changes many notable things over a period of time. Today, I would like to go over changes the bill will bring and go into a deeper explanation of it.
Starting at the beginning of 2018, the corporate tax rate will be lowered to 21%. This tax rate is very similar to those of other countries whose corporate tax rates are much lower than our own. It also will temporarily increase the present discounted value of capital cost recovery allowances on equipment. With the tax cut, these large corporate companies will be able to use the money saved on better working conditions and will be able to give more bonuses to workers, such as AT&T. With the passing of the act, it seems that the corporate Alternative Minimum Tax would be eliminated.
Individual Income Tax
The ax would also have numerous effects on the individual income tax. Many tax brackets are different with new brackets all having lower rates. The standard deduction has been almost doubled to $24,000 for married couples and 12,000 for single filers.There has been an alimony deduction placed inside the act as well as for casualty loss and moving expenses. There has also been an increase in the exemption levels, which means fewer people will be paying the alternative minimum tax. The act doubles the child tax credit from $1,000 to $2,000 and about 3/4 of that credit is refundable.
Another big factor in the act includes a 1.4% excise tax on investment income for private colleges with assets at 500,000 for every full-time student. According to some estimations, this tax will affect 32 universities around the country. With other miscellaneous tax provisions, such as a tax break for citrus growers, reduction in the excise tax on alcohol. A provision that allows television production companies to write-off the full cost of their investments was also installed.
There is a lot of changes coming with the Tax Cuts and Jobs Act so stay tuned for more updates. For a detailed explanation of the bill, click here.
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