As tax reform is completed it is important to consider its ramifications. The Tax Cuts and Jobs Act of 2017 is a complex and far-reaching revision to the country’s tax laws, and the most dramatic in 30 years. It will take some time to completely analyze its impact on businesses and individuals. However, there are some broad implications that are immediately discernable, including:
- Corporate tax rates will be reduced
- Individual tax rates will be reduced for a significant number of taxpayers
- Income that is taxed from pass-through entities (with the possible exception of certain personal service entities) will be sheltered to some degree
- A drastic increase in the ability to immediately expense asset purchases and an expansion of which assets are eligible will be implemented
- The standard deduction will be doubled, but the deductibility of certain other deductions will be limited
- Taxpayers who itemize their deductions may find that their ability to deduct home mortgage interest, interest on home equity loans, and state and local taxes will face new limitations
How can you plan for the changes that are coming? Clearly the old adage of accelerate deductions and postpone income remains appropriate in many cases. But any decisions must be made within a framework of the “big picture” of the new tax landscape.
It is important to remember the individual alternative minimum tax (AMT) has not gone away. One of the major reasons individuals are “trapped” by the AMT is the amount of state and local taxes which are deductible for regular tax, but not for the AMT. Careful planning is necessary to avoid this potential pitfall.
Your list of options and choices for effective tax planning for 2017 and future years has lengthened considerably with the passage of the Tax Cuts and Jobs Act. Gray, Gray & Gray is ready to assist you in determining how to best plan in this complex situation.
Your first step should be to register for our important tax webinar, “What You Need to Know About the Tax Cuts and Jobs Act,” which will be held on Thursday, January 4th, at 10:00 am EST. Click here to register now