As you know, President Trump signed the Tax Reduction Act into law on December 22, 2017. Now that the dust has settled, businesses and individuals should take note of the more significant changes.
The new law will significantly reduce corporate federal income tax rates from a maximum rate of 35% to a maximum rate of 21% for tax years beginning after December 31, 2017.
New entity selection planning is now more important as many business ventures may benefit from a 20% tax rate on certain types of pass-thru income.
The new law eliminates a taxpayer’s ability to deduct payments and legal fees relating to settlement of sexual harassment claims if the settlement is subject to a non-disclosure or confidentiality clause.
Like-kind Exchanges (Section 1031) entered into after December 31, 2017 will be limited to exchanges of real property. Tax free exchanges of artwork, collectibles, boats and airplanes will no longer be available for like-kind exchanges. There will be a transition rule for transactions that have been initiated by December 31, 2017.
Tax rates have also been reduced but the code will retain 7 graduated brackets ranging from a low of 10% to a high of 37%.
The Standard Deduction for individual taxpayers will almost double in amount from their current levels BUT there will be new limitations on itemized deductions for state, local tax or property taxes capped at $10,000. Also home mortgage interest will only be deductible on loans up to $750,000 in value.
The new law has eliminated the personal exemption for tax years after December 31, 2017.
Estate and Gift Taxes have also been revised to double the lifetime exemption from $5 million to $10 million (indexed for inflation) which creates additional estate and gift tax planning opportunities for many of our clients.
The items listed above are just a few of the changes in this new tax law. Tax and Estate plans should be revisited as planning put in place under the prior tax laws may now be in need of adjustment. Riley Riper Hollin & Colagreco is ready to assist you with your estate and income tax planning, entity selection planning and tax planning for transactions to help you take advantage of the opportunities under the new law.
Please contact Bob Cohen at firstname.lastname@example.org or 610-458-4400, Ext. 231 if you would like to schedule an appointment to discuss your individual situation.