Trying to understand the new tax code changes can be a dizzying experience.  My staff and I have spent the last few weeks poring over the new bill, which includes the most significant tax changes in more than 30 years!  Of course, we navigate these waters with our clients on a daily basis, but thought we would share with you, in laymen’s terms, what we consider to be the most impactful changes.

Corporations

The most dramatic changes made by the new bill are on the corporate side.

1)      Lower Corporate Tax Rate – The new, flat 21% rate offers a simplification, as well as a substantial decrease in the amount of taxes corporations owe.

2)      No Corporate AMT – Corporations no longer must pay an alternative minimum tax of 20%.

3)      Lower Repatriation Rate – Bringing money back into the US just got cheaper as the repatriation rate was cut by more than half for most companies.  The new bill sets a one-time repatriation rate of 15.5%.

4)      No Double Tax on Foreign Profits – The new law eliminates the US tax paid on profits earned abroad.

Personal

While corporate tax changes were the most significant, all our clients are seeing many changes to their tax situation personally as well.

1)      New Tax Brackets – Most of our clients will see a decrease in the amount of tax owed for 2018 as the tax brackets have shifted and rates lowered. I.e. The upper-most bracket, for those earning over $500k/year has decreased from 39.6% to 37%.

2)      Near Elimination of the Marriage Penalty – Most dual-income, married couples will notice an elimination of the marriage penalty (when two individuals with the same earnings fall into a lower tax bracket than when those incomes are combined when filing jointly.)  Unfortunately, the penalty does still exist for high-earners (both parties earning over $300k).

3)      Higher Standard Deduction – The standard deduction will almost double for most of our clients.

4)      Child Tax Credit – The child tax credit is double under the new law, going from $1,000 per child to $2,000.  Also, many more of our clients will now be able to take the credit as it will apply to those earning $200k or less individually or $400k or less for married couples filing jointly.

Of course, there were many more changes included in the new tax law, but these are the ones that will have the most significant impact for our clients.  If you are interested in learning more and understanding what you can do this year to lessen your tax burden, give us a call.

The 2017 filing deadline is fast approaching.  Still looking for a competent and trustworthy accountant to handle your return?  We'd be happy to welcome you into our family of clients, where you will receive the personal and genuine attention you deserve.