Here at MNMW, we want to keep you aware of tax developments that may affect you, your family, your investments, and your livelihood. There were a number of developments that occurred in the third quarter of 2017, and we have outlined a summary of those below.
President Trump and key lawmakers reveal tax reform plan
The Trump Administration and select members of Congress have released a “unified framework” for tax reform. The document provides more detail than a number of other tax reform documents that have emerged from the Administration in recent months, but it still leaves many specifics to be worked out by the tax-writing committees (i.e., the House Ways and Means Committee and the Senate Finance Committee).
Plan provisions affecting individuals would:
• Increase the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for single filers;
• Eliminate the personal exemption and the additional standard deductions for older/blind taxpayers;
• Reduce the number of tax brackets from seven to three: 12%, 25%, and 35%;
• Increase the child tax credit;
• Repeal the individual alternative minimum tax;
• Largely eliminate itemized deductions, but retain the home mortgage interest and charitable contribution deductions; and
• Repeal both the estate tax and the generation-skipping transfer tax
Plan provisions affecting businesses would:
• Provide a max 25% tax rate for “small” and family-owned businesses conducted as sole proprietorships, partnerships and S corporations (possible exception to Personal Service businesses);
• Reduce the corporate tax rate to 20% (down from the current top rate of 35%);
• Provide full expensing for five years; on assets that would normally be subject to depreciation;
• Partially limit the deduction for net interest expense incurred by C corporations;
• Repeal some deductions and credits, but retain the research and low-income housing credits;
• Modernize special tax rules that apply to certain industries and sectors;
• Provide a 100% exemption for dividends from foreign subsidiaries;
• To protect the U.S. tax base, tax the foreign profits of U.S. multinational corporations at a reduced rate and on a global basis; and
• Repeal the corporate alternative minimum tax
Disaster tax relief legislation
On September 29, President Trump signed into law the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (P.L. 115-63). The Act provides temporary tax relief to victims of Hurricanes Harvey, Irma, and Maria. Relief for individuals includes, among other things, loosened restrictions for claiming personal casualty losses, tax-favored withdrawals from retirement plans, and the option of using current or prior year’s income for purposes of claiming the earned income and child tax credits.
Businesses that qualify for relief may claim a new “employee retention tax credit” of 40% of up to $6,000 of “qualified wages” paid by employers affected by Hurricanes Harvey, Irma, and Maria (for a maximum credit of $2,400 per employee). In addition to the new law, IRS has granted specific administrative hurricane relief, for example, extending various deadlines, encouraging leave-based donation programs for hurricane victims, and allowing retirement plans to make hardship distributions.
Please call us at 239-433-5554 for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.