Washington, D.C. — Early this afternoon, November 16, 2017, the U.S. House of Representatives passed a major tax bill with potentially major ramifications for Americans and American businesses. The bill now goes to the U.S. Senate where the bill’s current language is not likely to pass; however, there is a strong chance at having the Senate and House get together with a bill they both favor and get it on President Trump’s desk before the close of the year. So, when reading below, keep in mind this is all subject to change. Additionally, this bill has no mentions of spending cuts, only tax cuts. Politicians say they plan to make up the difference in the cuts through growth in the economy spurred by the tax “reform.”
H.R. 1, also known as the “Tax Cuts and Jobs Act” would lower the corporate tax rate from 35 percent to 20 percent which would make America more competitive and its rate more in line with other countries around the world. If you own a small business with “pass-through” income, then the top tax rate would be reduced from 39.6 percent to 25 percent.
The ObamaCare individual mandate remains in the bill passed this afternoon which will be a major source of contention in the Senate. Although most Americans simply use the standard deductions, for those accustomed to itemize their deductions, they may face sticker shock if the doubling of the standard deduction is not enough to compensate. For example, those with high medical bills will no longer be able to deduct those expenses. Additionally, state and local income taxes will no longer be able to offset your federal income tax adjusted gross income as those deductions will go away along with the electric plug-in vehicle deduction.
While over 45 percent of Americans do not pay federal income taxes, over 90 percent of those Americans who do will see a reduction or no change over the next five years. Another plus to H.R. 1 is that the charitable deduction remains intact.
So, now we are off to the U.S. Senate to see where H.R. 1 goes from here.