By Nick Spoltore
On November 9, 2017, the Senate released its Description of the Chairman’s Mark of the “Tax Cuts & Jobs Act,” detailing many proposed changes to the Code. The following highlights are major points of the proposed legislation. The changes apply to tax years beginning in 2018 unless noted.
2017 Tax Rates – Single Individuals
| Not over $9,325 | 10% of the taxable income |
| Over $9,325 but not over $37,950 | $932.50 plus 15% of the excess over $9,325 |
| Over $37,950 but not over $91,900 | $5,226.25 plus 25% of the excess over $37,950 |
| Over $91,900 but not over $191,650 | $18,713.75 plus 28% of the excess over $91,900 |
| Over $191,650 but not over $416,700 | $46,643.75 plus 33% of the excess over $191,650 |
| Over $416,700 but not over $418,400 | $120,910.25 plus 35% of the excess over $416,700 |
| Over $418,400 | $121,505.25 plus 39.6% of the excess over $418,400 |
2017 Tax Rates – Married Individuals Filing Joint Returns and Surviving Spouses
| Not over $18,650 | 10% of the taxable income |
| Over $18,650 but not over $75,900 | $1,865 plus 15% of the excess over $18,650 |
| Over $75,900 but not over $153,100 | $10,452.50 plus 25% of the excess over $75,900 |
| Over $153,100 but not over $233,350 | $29,752.50 plus 28% of the excess over $153,100 |
| Over $233,350 but not over $416,700 | $52,222.50 plus 33% of the excess over $233,350 |
| Over $416,700 but not over $470,700 | $112,728 plus 35% of the excess over $416,700 |
| Over $470,700 | $131,628 plus 39.6% of the excess over $470,700 |
Proposed 2018 Rates – Single Individuals
| Not over $9,325 | 10% of the taxable income |
| Over $9,525 but not over $38,700 | $952.50 plus 12% of the excess over $9,525 |
| Over $38,700 but not over $60,000 | $5,226.25 plus 25% of the excess over $37,950 |
| Over $60,000 but not over $170,000 | $9,246 plus 25% of the excess over $60,000 |
| Over $170,000 but not over $200,000 | $36,746 plus 32.5% of the excess over $170,000 |
| Over $200,000 but not over $500,000 | $46,496 plus 35% of the excess over $200,000 |
| Over $500,000 | $151,496 plus 38.5% of the excess over $500,000 |
Proposed 2018 Rates – Married Individuals Filing Joint Returns and Surviving Spouses
| Not over $19,050 | 10% of the taxable income |
| Over $19,050 but not over $77,400 | $1,905 plus 12% of the excess over $19,050 |
| Over $77,400 but not over $120,000 | $8,907 plus 22.5% of the excess over $77,400 |
| Over $120,000 but not over $290,000 | $18,492 plus 25% of the excess over $120,000 |
| Over $290,000 but not over $390,000 | $60,992 plus 32.5% of the excess over $290,000 |
| Over $390,000 but not over $1,000,000 | $93,492 plus 35% of the excess over $390,000 |
| Over $1,000,000 | $306,992 plus 38.5% of the excess over $1,000,000 |
- Head of Household Status is retained with a due diligence requirement for paid preparers to determine eligibility for a taxpayer to file as Head of Household.
- The standard deduction would be $24,000 for MFJ, $18,000 for Head of Household and $12,000 for all other taxpayers. The Senate retains the additional standard deduction for the elderly and blind.
- An individual taxpayer generally may deduct 17.4% of domestic qualified business income from a partnership, S corporation, or sole proprietorship.
- The proposal increases the child tax credit to $1,650 per qualifying child. A $500 nonrefundable credit for qualifying dependents other than qualifying children is added.
- The home mortgage interest deduction is preserved for existing mortgages and maintained for newly purchased homes up to $1M. The proposal only repeals the deduction for interest on home equity indebtedness.
- The Senate plan repeals in full the deduction for state and local taxes. The House plan, contrastingly, retained the state and local property tax deduction up to $10,000.
- The Senate plan repeals the individual and corporate AMT.
- The Senate plan retains many current provisions that previously were targeted for repeal. Among these are the earned income tax credit, the deduction for medical expenses, the adoption credit, and the child and dependent care credit. 401Ks and IRAs remain essentially unchanged.
- The estate tax exemption is doubled to $11.2M in 2018. Unlike in the House bill, it would not be repealed.
- The corporate tax rate would be permanently lowered to 20% beginning in 2019.
- The Senate plan also retains the low-income housing credit and the research and development credit.
This article simply provides a summary of some of the crucial provisions outlined in the November 9th proposed legislation. Surgent will continue to provide you with up-to-the-minute analysis of this tax reform process right here on Surgent’s Tangible Gains blog. You’ll also be able to stay informed through our popular Best Federal Tax Update Course and Trending in Tax, both presented by Forbes tax policy writer, Tony Nitti, CPA.
Nick Spoltore is Senior Director of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.