The Trump administration and select members of Congress have released a “unified framework” for tax reform. The document provides more detail than a number of other tax reform documents that have emerged from the administration over the past few months, but it still leaves many specifics to be worked out by the tax-writing committees.
Here's what we know so far:
There's no indication in the framework release of when the tax reform provisions would be effective.
The framework shrinks the current seven tax brackets into three – 12%, 25% and 35% – with the potential for an additional top rate for the highest-income taxpayers.
The framework roughly doubles the standard deduction. It also significantly increases the Child Tax Credit. The framework eliminates many itemized deductions, but retains tax incentives for home mortgage interest and charitable contributions, as well as tax incentives for work, higher education, and retirement.
The framework repeals the Death Tax and substantially simplifies the tax code by repealing the existing individual Alternative Minimum Tax (AMT).
The framework limits the maximum tax rate for small and family-owned businesses to 25%.
The framework reduces the corporate tax rate to 20%.
The framework allows, for at least five years, businesses to immediately write off (or “expense”) the cost of new investments.
As you can see, a lot still needs to be defined by Congress and agreed to by a majority. We will be closely watching this over the coming weeks and months.
Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein