Tax reform has taken many twists and turns since April. It appears that any iteration of a tax reform bill will be far from business as usual. Simplification of tax rate tiers and nearly doubling the standard deduction have an overall aim of making individual tax filing easier. However, certain provisions for eliminating deductions are a valid concern among both business owners and individuals. There are good ideas that align with historic tax reform, and others that stray far from it. The best course is to look at your own tax situation from the previous year and consider ways to improve it, while sitting tight on tax news from the Hill. It’s only a framework, so far.
What we Know So Far About the New Tax Legislation
Earlier in 2017, our tax experts at Cornwell Jackson were anticipating what to recommend to clients about a possible change in business structure to manage corporate tax impacts. Initially, both the Trump and Republican tax plans proposed a large federal corporate/business tax rate reduction, putting the new rate for C Corps at 15 or 20 percent. It was a key campaign promise, and comments made by President Trump in March regarding a tax reform package emphasized that he wants to lower the overall tax burden on businesses, regardless of business structure.
Moving into the fourth quarter, President Trump is still promising significant tax cuts and simplification of the tax code. The “United Framework for Fixing Our Broken Tax Code” calls for lower individual tax rates under a three-bracket structure, nearly doubling the standard deduction, and a significant reduction in the corporate tax rate. The framework outlines changing the tax treatment of pass-throughs, expanding child and dependent incentives, and eliminating both the alternative minimum tax and the federal estate tax.
According to a report by Wolters Kluwer, a tax reform package moving through Congress under the reconciliation rules would require only a Senate majority. Any tax cuts would likely have to sunset after 10 years. But 10 years is significant to live with any actual changes.
I will attempt to point out proposed impacts to business owners and individuals in this article, along with how such changes align with historical tax reform and what that may represent for the next decade if we see new legislation for the 2017 tax year.
To drill down to a specific area of the tax reform bill, click on a link below.
Ultimately, consider your business goals and planning for investments or equipment purchases. Consider the current equipment expensing and bonus depreciation rules, the time frame for which your company will need the equipment, and your projected profits when making the decision whether to invest this year or next. The same holds true for estate planning. Planning with the guidance of your trusted advisors keeps you and your family in more control regardless of the next version of federal tax legislation.
As soon as we see some actual legislation from the Hill, there may be more to discuss for you or your company. Think of Cornwell Jackson if you are in need of longer-range planning, reporting support or guidance. And stay tuned!
Download the whitepaper: Tax Reform 2017 – How New Tax Legislation Will Affect Businesses and Individuals
Scott Allen, CPA, joined Cornwell Jackson as a Tax Partner in 2016, bringing his expertise in the Construction and Oil and Gas industries, and 25 years of experience in the accounting field. As the Partner in Charge of the Tax practice at Cornwell Jackson, Scott provides proactive tax planning and tax compliance to all Cornwell Jackson tax clients. Contact him at Scott.Allen@cornwelljackson.com or 972-202-8032.