Under the deal worked out by committee member of the House and Senate
Top individual tax rate = 37%, Current top tax rate = 39.6%
Deduction for SALT (state and local taxes) capped at $10,000
Alternative Minimum Tax on individuals would remain but the exemption would be increased to $500,000 for individual filers and $1,000,000 for those filing joint returns which would effectively eliminate the AMT for many filers.
Top corporate rate would be 21%
Negotiations are still under way for the “deduction” for pass-throughs. According to the WSJ a deduction of 20% is being discussed which equates to a rate of 29.6%.
There has been some speculation regarding the child tax credit and increasing it to as high as $2,000. As of now, it stands at $1,100. Republican Senator Marco Rubio threatened to vote against the bill unless the “child tax credit is made more generous to help lower-income workers by making it more refundable. Refundable tax credits can reduce your tax liability below zero and still allow you to receive a tax refund. Senator Rubio’s vote could utimately decide if the bill is passed.
No mention of the standard deduction amount, previously stated to be $24,000. Apparently, the medical expense deduction would remain which will benefit the elderly paying assisted living and nursing home expenses. The PBS New Hour confirmed what I had said previously that the benefit of charitable contributions would be substantially reduced by the increase in the standard deduction, as many taxpayers would no longer be able to itemize deductions. Charitable deductions are an itemized deduction.
Still too soon, to prepare any hard calculations as there are many details to be worked out. Accelerating estimated tax payment and charitable contributions into 2017 may be advisable in order to secure those deductions.
If anyone has any additional thoughts or reactions feel free to comment below.
-Keith Boyer, CPA