This month, the U.S. House of Representatives and Senate both released proposed laws looking to dramatically reform taxation in America. On November 16, ... read more >
OUR THOUGHTS ON:
Letter From Schneider Downs Tax Advisors
Tax Reform as of November 15, 2017
November 15, 2017
Proposed changes to the tax bill are coming faster than Formula 1 cars at the Brickyard on Memorial Day. It is difficult to keep up with the speed of the proposed changes and the potential impact on taxpayers. Yesterday, however, the prospects for sweeping tax overhaul cleared a procedural hurdle in the House. Lawmakers voted on Wednesday for the rule that sets the stage for a vote on passing the measure. That vote is expected to take place Thursday, November 16 after President Donald Trump travels to Capitol Hill to meet with GOP lawmakers.
On Tuesday, Republican leaders expressed confidence that they have the votes to pass a bill that would slash the corporate tax rate and reduce the number of individual tax brackets, while still eliminating some popular deductions. Separately, the Senate Finance Committee continued to work on its version of the bill. However, a vote by the full Senate is not expected until after Thanksgiving.
More importantly, the two chambers still need to reconcile the bills in hopes of getting a measure to President Trump by Christmas. There are still significant differences between the two proposals that will need to be eliminated by compromise between the House and Senate.
One surprising change offered by the Senate Republicans was a decision to include a repeal of the Affordable Care Act’s individual mandate in the tax plan. Another proposed change that will likely be opposed by many business groups is the elimination of an export incentive known as IC-DISC.
Selected highlights of recent tax proposals include:
- Child Tax Credit: The child tax credit would be expanded further than in the original proposal and under current law. The new proposal would increase the child tax credit from $1,000 under current law to $2,000 (from $1,650 in the introduced bill). It would also increase the phase-out to $500,000 for married filers from the current law phase-out of $110,000. The phase-out, however, is decreased from $1,000,000 in the original proposal.
- Most individual income tax changes would expire effective December 31, 2025. This includes the individual income tax rate cuts, the expanded child tax credit, the repeal of personal exemptions, and the expanded standard deduction.
- The new proposal would expand the number of businesses in service industries that could claim the special 17.4% deduction. Most service industries are disallowed the deduction, but there is an exception for smaller businesses by which they can claim the deduction regardless of industry classification. The new limit would be $500,000 for married filers and $250,000 for individuals, increased from $150,000 and $75,000, respectively, in the introduced bill.
- Starting in 2024, net operating loss (NOL) carryforwards would be limited to 80% of taxable income, down from 90%.
Please continue to follow our updates as more changes resulting from negotiations and further analysis of impacts on budgets and both individual and business taxpayers.
A tax reform bill has been passed by the House of Representatives today, November 16, 2017. The bill, H.R.1, passed by a 227-205 margin along party lines, ... read more >
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