Overview of Tax Cuts and Jobs Act

REPUBLICANS hail the Tax Cuts and Jobs Act as their biggest legislative achievement under President Trump. It’s the first major tax overhaul since the days of fellow Republican Ronald Reagan. The new tax law causes wide implications. It affects your decision to buy or rent a home or your decision to send your kids to private or public schools. It even influences when a couple decides to get a divorce or the amount of estate tax to be paid when one dies.

1. This is the first significant reform of the U.S. tax code since 1986: Republicans have been complaining of the tax code becoming more complicated with each passing year, until this year.

2. But it’s politics as usual in our good old USA: Republicans argue that the middle class will see benefits from the business tax cuts in the form of more jobs and higher wages while Democrats maintain that the tax cuts are simply a windfall to wealthy Americans like Trump.

3. Sorry, but you won’t be able to file your tax return on a postcard: Contrary to what President Trump said that H&R Block would go out of business after tax reform because filing taxes would become so simple that Americans could file on a postcard, that will not happen. It’s hard to blame Trump though for failing to deliver that post card promise because the final version came out of the woodwork from both sides of the aisle with fellow Republicans and Democrats alike.

4. Changes were made to both individual and corporate tax rates: Six of individual brackets are reduced while the corporate is drastically reduced.

5. Tax reform will increase deficits by $1.46 trillion over the next decade.

6. The Joint Committee on Taxation estimates every income group will receive an average tax cut. According to the nonpartisan Tax Policy Center, families making between:

• $50,000 and $75,000 will get average tax cuts of $890,

• $100,000 and $200,000 would get average tax cuts of $2,260,

• $1 million would get average tax cuts of nearly $70,000.

7. None of this will affect your 2017 taxes: We don’t have to worry about these changes when we file 2017 tax returns in 2018. Most provisions take effect in 2018 for the 2019 filing season.

In a nutshell, the Tax Cuts and Jobs Act:

• Lowers individual tax rates, including trimming the top bracket from 39.6% to 37%.

• Doubles the standard deduction which will help taxpayers without home mortgage deductions.

• Doubles the tax credit for children, which will benefit lower-income families.

• Limits mortgage interest to loans of $750,000 (down from $1 million under old law)

• Caps state and local tax deductions at $10,000 (currently unlimited)

• bolishes the Affordable Care Act’s penalty for Americans who don’t purchase health insurance.

• Exempts larger inheritances from the estate tax as it doubles thresholds to $11 million for individuals ($22 million for married couples).

• Reduces the corporate tax rate to 21 percent from 35 percent.

• Introduces a 20% deduction for pass-through businesses such as partnerships, S corporations and LLCs.

 

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California. 

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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies.  He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at vicsy@live.com.

 

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