The US Senate is currently voting on the new tax bill. After a month of backroom discussions, the following are some of the highlights to the current version.
This is by no means an exhaustive list. I just picked out the provisions that seemed to be most applicable to an Entrepreneur’s Return, which include…
1 – Tax Rates – The bill makes the tax rate changes and most of the other provisions of the Tax Cuts and Jobs Act of 2017 permanent.
2 – Standard Deduction – For tax years beginning after 2024, the Standard Deduction would increase to $15,750 for single filers, $23,625 for heads of household, and $31,500 for married individuals filing jointly. Beginning in 2025, the deductions will be annually adjusted for inflation.
3 – SALT Cap – It increases the State and Local Tax (SALT) Limitation to $40,000 which is similar to the House Version.
4 – PTETC’s – The Senate Version excludes any language in reference to bringing back the Pass Through Entity Tax Credits.
5 – Child Tax Credits – It makes permanent the Child Tax Credit of $2,200 per child with $1,400 of that being refundable. Both of these numbers would be adjusted for inflation in subsequent years.
6 – QBI – The Senate Version makes permanent a Qualified Business Income (QBI) Deduction of 20%. The House Version had increased it to 23%.
7 – Estate and Gift Tax Exemption – This makes permanent the Federal Estate Estate and Gift Tax Exemption amount of $15M ($30M for Joint Filers). Please remember that the Illinois exemption is still only $4M.
8 – No Tax on Tips – This would exempt up to $25K in tip income under certain provisions from income tax.
9 – No Tax on Overtime – This makes up to $12,500 ($25,000 for joint filers) of overtime pay exempt from income tax under certain provisions.
10 – Auto Loan Interest – This would be deductible in years 2025 – 2028 up to $10K per year given Income Exclusions.
11 – Rapid Depreciation – The Section 179 Depreciation Limit would increase to $4M per annum.
12 – R & D Expenses – Research and Development Expenses would again be deductible in the year incurred.
13 – Clean Energy Incentives – Most are terminated.
Let me leave you with this…
This is by no means a done deal. The Senate is currently debating and will begin voting. Its probably go long into the night, with lots of arm twisting and surprise changes being inserted at the last minute.
But let’s remember something that germane to the equation. Although Democratic opposition to the bill has been universal, even the most opposed Republican will probably vote for it given the alternative.
Going back to the old tax rates and system would probably push our economy into a recession and their elections are right around the corner.
Once passed, the process of reconciliation must occur where the two bills would be reconciled into one. Then both houses will need to vote on it again before its presented to the President to be signed into law.
This is my way of saying that it’s still too early for anyone to be making tax planning decisions. I just wanted all of you to know where things were headed.
Once the bill comes out of the reconciliation process we can become talking. Please notice how I just said talking. When the bill is signed into law, we can actually put changes into place.
Anything prior to that would be premature, and who in their right mind would ever want to be accused of that?
I’ll continue to write about this as the story progresses. We’re going to have a lot of work ahead of us to understand all of these changes.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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