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House Tax Bill Leaked

billbecomesalaw

Since the election, taxes have been in the forefront of changes the Republican party has been trying to make. In previous posts, we had informed you of some of the ideas that President Trump wanted to see changed in the tax code when he took office. It has been a guessing game as to what will happen to our tax code and when it will happen. Today, we received an update of the House Of Representatives tax bill proposal. The entire tax bill has not been released, but here is a straightforward breakdown of how this proposal might affect Wisconsin taxpayers.

 

I like you, you’re cute…you can stay!

  • Mortgage Interest Deduction: Current mortgages are grandfathered in. If you obtain a new mortgage, it will be capped at $500,000 for deduction purposes.
  • Earned Income Credit
  • Charitable Donations
  • Retirement Plans: You can still take tax breaks for contributions to retirement accounts if you qualify.
  • Real Estate Tax Deduction: Deduction will be capped at $10,000.

I guess we’re stuck with you for now

  • Obamacare Individual Mandate: You will still be assessed a penalty on your tax return if you do not have the minimum required health insurance.

Upgrade!

  • Standard Deduction: The standard deduction would double to $12,000 for single taxpayers and $24,000 for married couples.
  • Child Tax Credit: The child tax credit would be increased to $1,600 per child under 17, with an additional $300 credit for each parent as part of a consolidated family tax credit. The credit is currently $1,000 and is refundable.
  • Federal Estate Tax: The exemption amount will double to $11 million per person. The federal estate tax will be completely eliminated after 2024.

Let’s see if a change is for the better…

  • Tax Brackets: Consolidating the current seven tax brackets into four.
    • 12%: $12,000 – $45,000 for individuals ($90,000 for married taxpayers)

      25%: $45,001 – $200,000 for individuals ($260,000 for married taxpayers)

      35%: $200,001 – $500,000 for individuals ($1 million for married taxpayers)

  • Small Business Tax Relief: Businesses conducted as sole proprietorships, partnerships, and S corporations would be taxed at a rate of 25%. However, businesses that offer “professional services” like doctors, lawyers, accountants (BOO!), designers, and consultants wouldn’t qualify for the reduced rate.
  • Corporate Tax Relief: Corporations which do not pass through their income pay tax on profits at the corporate tax rate of a lowered 20%.

So hard to say goodbye

  • Personal Exemptions: You will no longer receive exemptions for all taxpayers and dependents listed on your tax return. This exemption is deemed to be included in the larger standard deduction. This could be a negative depending on your specific situation.
  • State Tax Deduction: You will no longer be able to include the state income tax you pay as part of your federal itemized deductions.
  • Medical Expenses: You will no longer be able to include out of pocket medical expenses as part of your itemized deductions.
  • Student Loan Interest: Ouch, this one hurts.
  • Alimony Payment Deduction
  • Moving Expenses

Don’t let the door hit you on the way out

 

A lot of these tax bill ideas coincide with some of the original proposals that we have heard over the past year. I will provide updates once we get the full bill, but these are some ideas that have been leaked. Keep in mind, nothing is happening, until the bill actually passes. Hammernik & Associates will be with you along the way to help Wisconsin taxpayers adjust to any tax law changes.

 

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