The latest on Tax Reform – Part 1

Tax Attorney

After months of talk, it looks like there may actually be a tax reform bill. The House Republicans just introduced a proposed bill that appears to have sufficient support to have a chance of passing. The Senate is in the same position. And President Trump has been pushing this for months so buckle up, tax law is likely to change in the next 6 months. Here are a few highlights of the proposal on the personal front:

Four tax brackets

Income Tax Rate Single Filers Married, Filing Joint
12% Up to $45,000 Up to $90,000
25% $45,001 to $200,000 $90,001 to $260,000
35% $200,001 to $500,000 $260,001 to $1,000,000
39.6% Above $500,000 Above $1,000,000

 

Married, filing Separate and Head of Household brackets have also been proposed but are likely to be adjusted.

Rates for capital gains and dividends are expected to remain unchanged.

Standard deductions are expected to increase substantially ($24,000 for married filers and half that for those filing single) but this comes at the cost of personal exemptions (expected to be repealed) and a number of other itemized deductions typically claimed on Schedule A (sales tax and property tax deductions to name just a few).

No change is expected on the charitable contribution front but the deduction for mortgage interest will likely be limited to first mortgages on one primary residence.

But before mourning or celebrating these changes, take a deep breath because there’s likely to be some serious fighting on the Hill before anything gets resolved and that means lots of things could shift one direction or another. About the only thing that’s truly certain at this point is that we’ll still have an income tax of some kind and the rules surrounding it will likely change. Whether the change will be better or worse is likely going to be a matter of perspective.

If you have a question regarding your tax return or would like to better plan for next year, give us a call at (480) 888-7111 to schedule your consult with one of our friendly and knowledgeable attorneys.

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