What to Expect From the Republican Tax Plan Today
House Republicans are set to unveil their tax plan today, but detail reports are already circulating. While nothing is set in stone, the changes they want to make are significant – “the biggest transformation in the US tax code in over 30 years,” according to the Wall Street Journal .
Overall, the Tax Cuts and Jobs Act aims to lower taxes for corporations and lower taxes for middle-class families. But here are some specific changes to expect, according to the WSJ report:
- They want to lower the corporate tax rate from 35% to 20%.
- The maximum tax rate for individuals is 39.6%, and the law will keep it. But this would reduce the number of tax breaks for individuals from seven to four: 12%, 25%, 35% and 39.6%. The 25% rate will start at $ 90,000 for couples, the 35% rate will start at $ 260,000, and the 39.6% rate will start at $ 1 million. For individuals, the levels will be as follows: US $ 45,000, US $ 200,000 and US $ 500,000.
- The child tax credit will increase from $ 1,000 to $ 1,600.
- The standard deduction would almost double, causing people to stop listing their deductions .
- The mortgage interest deduction will remain for homeowners, but it will limit future purchases to $ 500,000 (the limit is currently $ 1 million), meaning you can only deduct interest up to $ 500,000.
- State and local tax deductions will be capped at $ 10,000.
- The alternative minimum tax will be canceled.
- The bill removes many detailed deductions such as medical expenses, relocation costs, and student loan interest.
- US companies will not pay taxes on active overseas profits.
- Inheritance tax will be phased out.
According to the New York Times , discussions said the plan “does not change the popular retirement savings options that Americans have today, including 401 (k)” and Individual Retirement Accounts, or IRAs. Americans will be able to continue to do both. traditional pre-tax contributions and Roth contributions in the form most convenient for them. “
As expected, the plan does offer relief for some middle-class families, depending on tax category, but changes to the AMT and inheritance tax make it particularly beneficial for the wealthiest taxpayers and corporations. Again, nothing is set in stone, but an agreement is expected to be reached before the end of the year, and then changes will be made in 2018.