Final Republican Tax Bill – The Details

Corporate Income Tax

  • Flat tax rate of 21% effective January 1, 2018
  • 100% deduction for qualified property through 2022, then phased down over 5 years.
  • Interest expense deduction limited to 30% of adjusted taxable income if average receipts are greater than $25 Million
  • Alternative minimum tax would be repealed
  • The two-year carryback and 20-year carryforward periods would be eliminated, allowing the NOL to be carried forward indefinitely. The NOL deduction would be limited to 80% of the taxable income.

 

Business Income tax of Sale-Proprietors, S Corporation, & Partnerships

Deduction equal to 20% of their allocable share of business income

Limitations for S-Corp equal to the lesser of:

  1. 20% of allocable share of business income, or
  2. 50% of share of the W-2 wages of the S-Corp.

Limitations for Real Estate Partnerships equal to the lesser of:

  1. 20% of net income, or
  2. 25% of W-2 wages plus 2.5% of allocable share of the unadjusted basis of the building.

 

Individual Income Tax

Tax brackets would remain at 7, but the rates would be lower for most brackets including

Rate Single Married filing jointly
10% Up to $9,525 Up to $19,050
12% $9,525–$38.7K $19,050–$77.4K
22% $38.7K–$82.5K $77.4K–$165K
24% $82.5K–$157.5K $165K–$315K
32% $157.5K–$200K $315K–$400K
35% $200K–$500K $400K–$600K
37% Over $500K Over $600K

 

Standard deduction increases to $12,000 for individuals, $18,000 for head of household and $24,000 for married couples filing jointly.

Personal exemptions will be eliminated.

State and local Tax deduction can be combined with property taxes to reach and not to exceed a total amount of $10,000.

Mortgage Interest can be deducted on the interest paid on the first $750,000 of mortgage debt for a first and second home. No home line of equity can be deducted.

Medical expenses above 7.5 percent of a taxpayer’s adjusted gross income can be deducted for 2017 and 2018; 10% thereafter.

Charitable Contributions still allowed

Other miscellaneous itemized deductions Eliminated

Student Loan Interest can continue to be deducted up to $2,500.

Alimony for divorce or separation instruments executed after December 31, 2018, will no longer be deductible by the payer, nor will it be includible in income of the payee.

Trump’s Tax Reform Plan, or not….

A few highlights of what is supposed to happen in the next month or so, and a crucial caveat: nothing is written in stone…. so, stay tuned.

In the past month, both the House Ways and Means Committee (“House”) and Senate Finance Committee (“Senate”) have proposed a tax legislative bill to revamp the current US tax code.  The House released its proposal on November 2; the proposal was passed in the House of Representatives after a vote on November 16.  The Senate released its proposal on November 10 and is scheduled to pass the bill to a full vote of the senate after returning from the Thanksgiving holiday.

We have received many requests to determine the impact of the proposed bills.  Both bills are complexed with a variety of changes for corporations, pass-through entities and individuals’ taxation.

Changes will affect deductions, repeal of the estate tax, repeal of the individual and corporate alternative minimum tax, and a shift to a territorial system for foreign-sourced income.

Below are selected highlights for both proposals related to corporate and individual income tax:

House Bill

Senate Bill

Corporate Income Tax

Flat tax rate of 20% effective
January 1, 2018.

Flat tax rate of 20% effective
January 1, 2019.

100% deduction for qualified
property placed into service for 5 years.

100% deduction for qualified
property placed into service for 5 years.

Alternative minimum tax would
be repealed.

Alternative minimum tax would
be repealed.

The two-year carryback and 20-year carryforward periods would be eliminated,
allowing the NOL to be carried forward indefinitely.    The NOL deduction
would be limited to 90% of the taxable income.

The two-year carryback and 20-year carryforward periods would be eliminated,
allowing the NOL to be carried forward indefinitely.    The NOL deduction
would be limited to 90% of the taxable income.

Individual Income Tax

Tax brackets would be
reduced from seven to four.

Tax brackets would remain at 7, but the rates would be lower for most
brackets including

Rate

Single

Married filing jointly

Rate

Single

Married filing jointly

12%

Up to $45K

Up to $90K

10%

Up to $9,525

Up to $19,050

25%

$45K–$200K

$90K–$260K

12%

$9,525–$38.7K

$19,050–$77.4K

35%

$200K–$500K

$260K–$1M

22%

$38.7K–$70K

$77.4K–$140K

39.6%

Over $500K

Over $1M

24%

$70K–$160K

$140K–$320K

 

 

 

32%

$160K–$200K

$320K–$400K

 

 

 

35%

$200K–$500K

$400K–$1M

 

 

 

38.5%

Over $500K

Over $1M

Standard deduction increases to $12,200
for individuals, $18,300 for head of household and $24,400 for married
couples filing jointly

Standard deduction increases to $12,000
for individuals, $18,000 for head of household and $24,000 for married
couples filing jointly

Personal exemptions will be eliminated.

Personal exemptions will be eliminated.

State and Local Tax deduction will
be eliminated, with the exception of property taxes that can be deducted up
to $10,000.

State and Local Tax deduction will
be eliminated completely.

Mortgage Interest can be deducted on the
interest paid on the first $500,000 of mortgage debt.

Mortgage Interest can be deducted on the
interest paid on the first $1,000,000 of mortgage debt.

Medical Expense deduction will be eliminated.

Medical expenses above 10 percent of a
taxpayer’s adjusted gross income can be deducted.

Student Loan Interest deduction will be
eliminated.

Student Loan Interest can continue to be
deducted up to $2,500.

These proposals are not final and at this time it cannot be determined when or if either proposal will be passed. As noted above, there are key differences between the two bills that need to be resolved.  The bill can only be passed into law once both the house and senate pass identical bills.

Under Banks’ Microscope: How KYC (Know Your Customer) bank compliance is going to affect you

Banks have been required to enforce their Final Customer Due Diligence Rule and will “look through” both individual and nominal legal entity account holders to clearly identify them.

Did you receive a KYC (Know your Customer) Form from your bank? Here’s what you have to know:

KYC Policies enable banks to know their clients and comply with The FinCen guidelines with respect to the U.S. Bank Secrecy Act/Anti Money Laundering (AML) regulations.

Under these regulations every financial institution has to obtain beneficial ownership and control information when an account is being opened. AML Compliance includes analyzing the account relationship, develop a customer risk profile and conduct ongoing monitoring to identify and report suspicious transactions.

If you are an individual you will be asked to submit copies of your ID or passport, form W9 or W8Ben, and documents proving your current address.

If you are a legal entity you will be asked to verify the legal status of the entity, the identity of the authorized signatories and the identity of the beneficial owner/s, and/or controllers of the account and the chain of ownership of the entity.

If you refuse or delay your answer, the Bank is entitled to refuse to open new accounts or discontinue its relationship with you.

Any questions or concerns?  Please contact us, we at GC Consultants, Inc. are here to help you and clarify all your doubts.