As of Friday, December 15, the House and Senate have agreed in principal to a final tax reform bill. Below is a summary of what will likely be included in the final bill. Keep in mind that the final bill sill needs to be voted through by the House and Senate before the President can sign the legislation into law.
- The state and local tax deduction will be limited to $10,000. If you typically make quarterly estimated tax payments, making your fourth quarter estimated payment before December 31, 2017 may ensure you get to take advantage of this deduction before it becomes limited – but watch out for AMT!
- Owners of pass-through entities, such as S-Corporations, Partnerships, and LLC’s will be entitled to a deduction on their individual tax return of 20% of pass-through business income. No details were provided whether owners of professional service corporations such lawyers, accountants, and physicians would be excluded from taking this deduction.
- Mortgage interest would be limited to mortgage debt of $750,000.
- The medical expense deduction for medical expenses in excess of 10% of AGI would be retained, and the floor would be temporarily lowered for two years to 7.5% allowing more individuals to claim this deduction.
- The health insurance mandate would be lifted.
- The standard deduction would be nearly doubled, but this would be offset by doing away with exemptions taxpayers claim for themselves and dependents.
- The top tax bracket would drop from 39.6% to 37.0%. Details on the other brackets and the income thresholds for the brackets were not made available.
We will continue to closely monitor tax reform efforts taking place in Washington, and provide updates as new information becomes available.