Question

In: Accounting

What should tax reform look like and did the bill that just passed meet your standards?..Why...

What should tax reform look like and did the bill that just passed meet your standards?..Why or why not ?

Solutions

Expert Solution

The bill is not yet finalized. Saturday's vote means the Senate and House have passed similar tax reform plans, but negotiators from both chambers will start meeting Monday to agree on a single piece of legislation that both chambers must approve before it is sent to the president for his signature.

Here’s how the latest legislation would affect you:

What deductions can I claim under the Senate bill that just passed?

The Senate bill does away with federal deductions for state and local income and sales taxes, but allows deductions of up to $10,000 in local property taxes. The legislation originally eliminated federal deduction for all state and local taxes, but the property tax exemption was later added at the insistence of Sen. Susan Collins, R-Maine, who said she was “delighted” about the change.

What about personal deductions?

Like the House bill, the Senate bill nearly doubles the standard deduction level to $12,000 for individuals (up from $6,350) and $24,000 for couples (up from $12,700).

Any other deductions I could claim?

The Senate bill retains the current limit for the home mortgage interest deduction to interest paid on the first $1 million of the loan. (The House bill reduces the limit to $500,000 for new home purchases.) The Senate version also preserves the deduction for medical expenses not covered by insurance (the House bill does not), but ends deductions for moving expenses and tax preparation.

Why does the Senate bill allow deducting medical expenses not covered by insurance?

Because the Senate bill also repeals ObamaCare’s individual mandate, while the House bill does not. If ObamaCare’s mandate is repealed, thousands of people are expected to drop their health insurance, raising the cost for those who decide to keep it.

And the personal exemption?

The Senate and House bills both eliminate the $4,050 personal tax exemption.

Will the tax brackets change at all?

The Senate bill keeps seven tax brackets, but reduces them to 10, 12, 22, 24, 32, 35 and 38.5 percent. (The current brackets are 10, 15, 25, 28, 33, 35, and 39.6 percent.) The House measure condenses seven brackets to four: 12, 25, 35 and 39.6 percent.

I own a small business. What would this mean for me?

The Senate bill allows owners of so-called “pass-through” businesses (that is, businesses that aren’t incorporated) to deduct 23 percent of their earnings, and then pay at their personal income tax rate on the remainder. This issue was a key concern of Sens. Ron Johnson, R-Wis., and Steve Daines, R-Mont., both of whom announced this week that they would support the bill.


Related Solutions

How did the 2018 Tax Reform Bill address Corporate Tax Reform? Highlight and Analyze the major...
How did the 2018 Tax Reform Bill address Corporate Tax Reform? Highlight and Analyze the major provisions.
Describe Ford’s VMC in detail. What does a more traditional VMC look like and why did...
Describe Ford’s VMC in detail. What does a more traditional VMC look like and why did Ford have to make changes to the traditional VMC strategy for their campaign? Will this type of campaign work for Ford’s other consumer segments and other car models? Please be specific as to why this may or may not work and what Ford models might be attractive for this type of VMC campaign.
Do we need Tort Reform? If not, why not? If so, what reform do you like...
Do we need Tort Reform? If not, why not? If so, what reform do you like the best?
ACC 407 question :) What is a tax levy and what does it look like on...
ACC 407 question :) What is a tax levy and what does it look like on paper through accounting? Thank you for your help!
what did the economy look like during the great depression as compared to today in the...
what did the economy look like during the great depression as compared to today in the covid19 recession
In your opinion, did Monsanto violate any ethical standards in their genetic modifications? What should Monsanto...
In your opinion, did Monsanto violate any ethical standards in their genetic modifications? What should Monsanto done differently? Was it ethical to for Monsanto to settle the litigation with no admission of responsibility or commitment to change any internal practices?
what should the indifference curve between income and crime look like?
what should the indifference curve between income and crime look like?
What will your statement of interest look like for your program of choice?
What will your statement of interest look like for your program of choice?
Why did automakers like Honda implement Just-in-Time (JIT) manufacturing? What is JIT? What are the benefits/advantages...
Why did automakers like Honda implement Just-in-Time (JIT) manufacturing? What is JIT? What are the benefits/advantages for both the buyer and the seller? What are the challenges or potential disadvantages for both the buyer and the seller? What types of products is JIT likely to be most useful for?
Why did automakers like Honda implement Just-in-Time (JIT) manufacturing? What is JIT? According to the class...
Why did automakers like Honda implement Just-in-Time (JIT) manufacturing? What is JIT? According to the class materials, what are the benefits/advantages for both the buyer and the seller? What are the challenges or potential disadvantages for both the buyer and the seller? What types of products is JIT likely to be most useful for?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT