The Republicans have unveiled their tax reform framework. They announced that their goals were to cut taxes, simplify the Internal Revenue Code, and provide a more competitive environment for businesses. The framework generally mirrors the proposals made by President Trump in April. Under the new bill, the top individual tax rate would be 35% and the corporate rate would be 20%.
While the framework provides tax reform targets, it does not provide legislative language which still needs to be developed. The Republicans want to have new tax legislation before the end of the year.
There will be three tax brackets: 12%, 25% and 35% and the framework allows Congress to add a fourth bracket for high-income individuals.
Repeal of the Alternative Minimum Tax: One of the largest “add backs” in high taxed states to the AMT is state income taxes. This is also due to be repealed so this might “pull” those individuals out of AMT.
Repeal of the estate and generation-skipping tax
Taxing pass-through income at a maximum rate of 25%. The wording develops rules to ensure that high-income individuals do not use this provision to avoid the 35% bracket.
Consolidating the Standard Deduction and personal exemptions into a larger standard deduction of $12,000 for individuals and $24,000 for married couples
Increasing the child tax credit and providing a $500 credit for the care of non-child dependents.
Eliminating most itemized deductions, including the deduction for state income tax and local taxes, while preserving the deductibility of mortgage interest and charitable contributions.
An end to the taxation of U.S. companies ‘ worldwide income and move to a territorial system.
A one-time tax on accumulated offshore earnings, which would be taxes at two unspecified rates. One rate for cash and a lower rate for other assets.
Limiting the deductibility of interest
For five year (or more), allowing 100% expensing of the cost of depreciable assets for buildings
The framework still needs to be moved to legislation and a Bill introduced. Stay tuned for any updates!