On December 2, 2017 the U.S. Senate passed the Tax Cuts and Jobs Act with 51 against 49 votes.
For businesses the bill a.o.:
- reduces the corporate tax rate from a maximum of 35% to a flat 20% rate (25% for personal services corporations);
- allows increased expensing of the costs of certain property;
- limits the deductibility of net interest expenses to 30% of the business's adjusted taxable income;
- repeals the work opportunity tax credit;
- terminates the exclusion for interest on private activity bonds;
- modifies or repeals various energy-related deductions and credits;
- modifies the taxation of foreign income; and
- imposes an excise tax on certain payments from domestic corporations to related foreign corporations.
With respect to individuals, the bill a.o.:
- replaces the seven existing tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with four brackets (12%, 25%, 35%, and 39.6%);
- increases the standard deduction;
- repeals the deduction for personal exemptions;
- establishes a 25% maximum rate on the business income of individuals;
- increases the child tax credit and establishes a new family tax credit;
- repeals the overall limitation on certain itemized deductions;
- limits the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages of up to $500,000 (currently $1 million);
- repeals the deduction for state and local income or sales taxes not paid or accrued in a trade or business;
- repeals the deduction for medical expenses;
- consolidates and repeals several education-related deductions and credits;
- repeals the alternative minimum tax; and
- repeals the estate and generation-skipping transfer taxes in six years.
The next step in the legislation process is to send legislation to the President Trump.
The text of the bill can be found here.
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