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Saturday November 18, 2017

Washington News

Washington Hotline

Senate Tax Cuts and Jobs Act

On November 9, the Senate Finance Committee released its version of the Tax Cuts and Jobs Act. The Senate Finance Committee press release stated the bill would provide "fiscally responsible middle-class tax relief by cutting tax rates across the board, reducing the tax burden on American job creators and modernizing our tax system."

The Senate Finance Committee release summarized the main provisions of their comprehensive tax bill.
  1. Tax Rates - There are seven brackets ranging from 0% to 38.5%. The top rate applies to taxpayers with income over $500,000 for single filers and $1 million for married couples. A goal of the bill is to provide tax relief for middle-income taxpayers.
  2. Standard Deduction - The standard deduction is nearly doubled to $12,000 for single filers and $24,000 for married couples. With this larger standard deduction, an estimated nine out of ten taxpayers will not itemize and may use a postcard tax return.
  3. Family Provisions - In an effort to help families, the Child Tax Credit is increased to $1,650. The Dependent Care Tax Credit and Adoption Tax Credit are both retained.
  4. Charitable Contributions - The permitted deduction for most donors increases from the prior amount of 50% of adjusted gross income to 60%.
  5. Mortgage Interest - A taxpayer may deduct mortgage interest on a primary residence with loans valued up to $1 million.
  6. Medical Deductions - If a taxpayer itemizes, he or she may continue to deduct qualified medical expenses.
  7. Retirement Plans - The existing rules for IRAs, 401(k) plans, 403(b) plans and other types of retirement plans are maintained.
  8. Earned Income Tax Credit (EITC) - The tax credit for lower-income persons is continued.
  9. Alternative Minimum Tax (AMT) - The AMT is repealed.
  10. Estate Tax - The bill doubles the exemption to $10 million plus indexed increases. A couple in 2018 could have a basic exclusion amount of $21.96 million.
Editor's Note: This objective explanation of the Senate tax bill is offered as a service to our readers. The Senate Finance Committee will start a markup of the bill on November 13, 2017. Because the Senate is in recess over Thanksgiving week and will need to pass a budget for 2018 in December, the calendar is very busy. It will be difficult under Senate rules to proceed through the Senate Finance Committee markup, pass a bill, have a conference with the House and pass the final bill prior to the end of this year. It now seems quite likely that passage of tax reform may occur in the first quarter of 2018.

Published November 10, 2017
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Harry Greenstein Legacy Society

If you have already made plans to remember The Associated in your estate plans, we invite you to join The Harry Greenstein Legacy Society so we may acknowledge your thoughtfulness and generosity.
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