The nation is launching into the new year with new tax legislation signed, sealed and delivered. This tax reform poses the largest U.S. tax code overhaul in over 30 years,
and individuals and businesses alike are wondering where it leaves them. There has been a fair amount of media coverage regarding how the new code impacts large,
international corporations, but there are also a few significant changes that will affect individuals’ and small business owners’ take-home pay. Ahead, read a brief
summary of key points and questions regarding the new tax code, and what it means for you.
When will the tax reform go into effect?
The changes will not have any impact on your taxes for 2017. Those are due to the IRS by April 17, 2018 (this year, you get an extra 48 hours to file your taxes because
the traditional April 15 due date falls on a Sunday). Most provisions of the new bill, like the new tax brackets and standard deductions, began on January 1, 2018, and
others (such as the Obamacare mandate elimination) will go into effect in 2019.
What’s with the new corporate tax rate?
The corporate tax rate has been cut from 35% to 21% (starting in the 2018 tax year). The alternative minimum tax for corporations has been completely
eliminated, and earnings are expected to go up as a result.
What about tax cuts for my small business?
Pass-through entities (businesses that are not incorporated such as sole proprietorships and LLCs) will catch a break. The tax burden has been lowered by a
20% deduction for owners, partners, and shareholders of S-corporations, LLCs and partnerships who pay their share of the business's taxes through their individual tax
returns. Many CEOs have said they will use these savings to make capital investments, expand their buildings, get new equipment and more.
Does my mortgage deduction change?
The most simple answer is no. Mortgage deductions for new loans may be impacted, but your existing mortgage will not be.
Here are a few additional considerations:
- Individual provisions in the new legislation will technically expire in 2026, though it is possible a future Congress could extend them. The business tax cut, however, are permanent — at least until further legislation seeks to repeal them.
- There are still seven individual tax brackets, but the rates for five have been reduced. The new rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
- The above-mentioned business pass-through deduction begins to phase out for couples earning more than $315,000.
Historically, this type of tax plan has put more money into the pockets of entrepreneurs, making it easier for them to invest more in their own businesses. If
you are an entrepreneur or small-business owner, we encourage you to meet with your certified public accountant to learn exactly how the tax reform impacts your
business and adjust your financial plan accordingly. Following that, the friendly and helpful team at Standard Affluent Private Bank can assist in identifying the most appropriate loans
and products for your business.
Whether you are an individual homebuyer, part of a growing family or a small-business owner, it’s nice to know you can trust your community bank to steer you in
the right direction. Stop by and talk to us at your nearest community location, or contact us to learn more about how we can help you reach your financial goals.
