It looks like the Tax Reform Conference Committee is getting close to reconciling the House and Senate- passed versions of the most massive change to our federal tax laws since 1986. Sources indicate that the final version of the combined bill could be released tomorrow afternoon, Friday, December 14th and that it could be voted on by both Congressional chambers next week. If passed, the tax legislation could indeed be on the president’s desk and signed by President Trump by Christmas.
In the meantime, some of the expected provisions of the final Tax Reform plan have been discussed publicly, so we can gain some insight into what the final bill will include. Here is some of what we know so far, but keep in mind it’s not final until it’s final.
The highest individual tax rate is likely to be 37%, down from its current 39.6%. The corporate tax rate will probably be 21%, down from 35% now, and up a percent from the original House and Senate versions’ rate of 20%.
State and Local Tax Deductions (see our post of November 20, 2017) will likely be limited to $10,000, but will now include income taxes, property taxes and state sales tax, as under current law. The income & sales tax allowance was added to the final bill in apparent deference to high state-tax states such as California and New York.
The pass-through entity tax benefits (see our post of December 4, 2017) will likely resemble the Senate version’s deduction, rather than the House bill’s maximum tax of 25% on a portion of an individual taxpayer’s business income. However, the deduction looks like it will be limited to 20% of the taxpayer’s qualified business income. While this 20% deduction is less than the 23% proposed in the original Senate bill, with the decrease in the maximum tax rate to 37%, the net tax rate on this business income will be approximately the same as it would have been per the original Senate bill, around 30%.
A last-minute sticking point has been the amount and refundability of a child tax credit for low income households. Many legislators want to include a generous benefit here but are wrestling with how to pay for it.
We should have more clarity on the entirety of the Tax Reform Plan tomorrow…..Stay tuned.