![]() ![]() In 2017, the amount of the tax is 2.5 percent of income or $695, whichever is greater. Effective repeal of Obamacare’s individual mandateīeginning in 2014, Obamacare requires everyone to either purchase a government-approved health care plan or pay a tax, known as the individual mandate penalty. Under current law, taxpayers are allowed to reduce their adjusted gross income for themselves and dependents by a personal exemption of $4,050 in 2017. The bill repeals the deduction for personal exemptions. JCT estimates that this increase in the standard deduction will result in approximately 95 percent of taxpayers taking the standard deduction, up from the nearly 70 percent who take the standard deduction currently. The standard deduction for tax year 2017 is $12,700 for joint filers, $9,350 for heads of households, and $6,350 for single filers. Under current law, people may itemize their deductions or take the standard deduction. These amounts will be indexed for inflation using chained CPI-U. The bill would nearly double the standard deduction to $24,000 for joint filers, $18,000 for heads of households, and $12,000 for single filers. Unlike the rest of this title, the move to chained CPI-U does not expire after December 31, 2025. ![]() Chained CPI-U more accurately reflects actual consumer costs because it allows for the fact that consumers can switch to less expensive substitute goods when prices rise. The new tax brackets are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 38.5 percent.Īll tax parameters that are currently indexed to the consumer price index will instead be indexed to chained CPI-U. The bill lowers marginal tax rates and keeps the number of tax brackets at seven. Notable Bill Provisions Tax Reform for Individuals Simplification of Tax Rates The Finance Committee has also provided a section-by-section of the bill as reported from committee, available here. For more detail on any provision discussed in this notice, JCT has provided technical explanations on its website for the chairman’s mark and the modification to the mark. The Joint Committee on Taxation estimates that the bill reported by the Finance Committee will reduce revenues by $1.414 trillion from 2018-2027, based on a current law baseline. ![]() It is estimated that tax reform would cause average household income to rise by $4,000, cause wages to increase between 4 percent and 7 percent, and result in a U.S. has the highest corporate tax rate in the developed world, and the international tax system imposes a second layer of tax on a corporation that brings profits back to the U.S. Since then, the tax code has grown in length and complexity complying with the tax code takes families and businesses 6 billion hours a year, at a cost of $263 billion. The bill also repeals both the individual and corporate alternative minimum tax. For corporations, the bill lowers the tax rate to 20 percent, moves to a territorial tax system for international operations, and simplifies the corporate tax code. For small businesses, the bill includes a deduction to lower the marginal tax rate applied to pass-through business income. It nearly doubles the standard deduction, effectively eliminates Obamacare’s individual mandate, increases the child tax credit, eases the burden of the estate tax, and includes other provisions lowering taxes for individual people and families. Background: The Senate Finance Committee passed the Tax Cuts and Jobs Act of 2017 out of committee on November 16 by a vote of 14-12.įloor Situation: The Senate is expected to consider this legislation the week of November 27.Įxecutive Summary: The bill would lower individual, small business, and corporate tax rates.
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