Here are a few highlights of the new tax plan:
- The top individual rate is reduced from 39.6% to 38.5%, and the threshold at which the top rate kicks in is increased from $418,000 for a single/$480,000 for married filing jointly to $500,000/$1,000,000. Further down the brackets, rates are reduced as well.
- The top rate on the income earned by owners of “flow through” businesses — S corporations and partnerships — is reduced from 39.6% to a shade below 30%.
- The standard deduction is doubled from $6,350 for a single/ $12,700 if married to $12,000/$24,000.
- Deductions for personal exemptions are repealed, but the child tax credit is increased from $1,000 to $2,000.
- Many popular itemized deductions — state and local income taxes, casualty losses, and unreimbursed employee expenses, among others — are eliminated.
- The estate tax exemption is doubled, to $11 million for a single taxpayer and $22 million for married taxpayers.
- The alternative minimum tax remains intact, although with a higher exemption amount.
- The corporate rate is reduced from 35% to 20%.
- Businesses will be able to immediately expense many asset purchases; after five years of 100% expensing, the rate will phase out at 80%/60%/40%/20% rates over the ensuing four years.
- The international tax regime is completely revamped, shifting from a deferral system to a territorial system.
All of the individual changes listed above, as well as the change in the estate tax, will expire on December 31, 2025 and reset to current law.
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