Congress recently approved the tax reform law, and President Trump signed the reforms into law.
The tax reform law is a massive tax reform package created to lower the tax rates applicable to corporations, individuals, pass-through entities, and estates. According to https://juliogonzalez.com/, these reforms are intended to move the US towards participating in the exemption-style tax system applicable to the taxation protocols applicable to the taxation of the foreign-source income of the domestic multination corporations.
One of the effects of the enactment of this tax relief law is the elimination and the scaling back of most of the current outstanding deductions, incentives, and credits to individuals and businesses. According to the staff in the Joint Committee on Taxation, the cost of the unoffset bills accounts for about $1.46 trillion applicable to the 10-year budget window from 2018-2027. This amount is to be added to the current budget deficit. This newly enacted law is officially referred to as An Act intended to provide for reconciliation, pursuant to titles II and V of the concurrent resolution on the budget for the fiscal year 2018, the Act, is an amalgam of the two competing measures for tax reform – one approved in November 2017 in the House and the other approved on December 2, 2017, by the Senate. In some ways, however, the newly enacted tax reform law tracks more closely and in some significant ways to the Senate Bill.
It’s also noted that the outcome of the law’s enactment is a likely nod to a number of factors, but most notably, the legislation that was moved (through Congress) under the budget reconciliation protections to allow for certain legislation moves through Congress, under the budget reconciliation protections which would allow Senate to overcome the procedural hurdles that arise in the chamber often, with a simple majority vote, rather than the three-fifths majority.
The law also notes that the approved protections come at a price, including strict procedural and budgetary rules (Byrd Rules) prohibiting the reconciliation legislation from increasing the federal budget deficit out of the given 10-year window.
Under the law, these are the implications you should be aware of:
Introduction of New Tax Brackets
Under the new laws, if you fall in the 25% tax bracket, your new tax bracket will be 24%.However, you need to bear in mind that the tax bracket you fall in doesn’t necessarily reflect the total amount of the taxes you will owe because your taxable income would be broken up into chunks or tax brackets, all designated specific tax rates, from 10% going up. The tax rates in the 2018 tax reforms are broken into different brackets – 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Marginal Tax Rates were also talked about a lot. These tax rates are the percentages of your income that taxpayers pay in taxes – incomes aren’t taxed at a fixed rate, but at different rates, as seen above.
Tax Breaks for Homeowners (Some)
While some taxpayers will experience shrinking of their tax breaks, the breaks may be pared for others. In the new reforms, the mortgage interest deduction has been scaled back for individuals with larger mortgages, while the tax deductions for the property taxes, the local and state taxes have been capped. For others, the changes have no impact on the taxes.
Doubled-up Child Tax Credits
The new tax reforms have increased the child tax credit by doubling. The changes also mean that the taxpayers with non-child dependents get a break in the form of a $500 credit.Under the new laws, credit exceeding $1,4000 is refundable, meaning that the lower-income families may not get bigger refunds.
Doubled up Standard Deductions
The standard deductions from the 2018 tax reforms have doubled from $6,500 to $12,000 for the single filers and $13,000 to $24,000 for the joint filers.The standard deductions from the 2018 reform could, therefore, score you a lower tax bill than you would score by itemizing items. The standard deductions also take less time and are stress-free as it lowers your tax-prep bills.
Finally, you need to know that just about all the changes made in this Tax Reform Bill will expire after 2025, but the majority of the business provisions will stay put.
