The House passed their bill yesterday. Within the next few weeks the Senate will likely make changes, compromises will be made. A bill is likely to be passed by year end marking the largest reform tax since 1986 in an attempt to stimulate broad economic growth across the USA.
Big question for individuals remains as to what happens with the state and local income tax deduction, the property tax cap, the mortgage interest tax deduction limit and the home equity interest deductibility.
Highlights of House Plan:
- Tax rates reduced to 5 brackets from 7 brackets (12/25/35/39.6%)
- AMT is repealed
- Standard deduction is doubled (eg $12k to $24k for couples)
- Child tax credit expanded to $1,600; increase income limits
- Estate/Gift tax exemption doubled to $10MM from $5MM
- Personal exemptions – repeal deductibility
- Itemized deductions – repeal or limit itemized deductions ($10k property tax cap; $500k mortgage cap for 1st time home buyers)
Small Business Taxes
- 25% rate on pass-through income (9% rate on first $75k)
- No pass-through losses
- 20% corporate tax rate effective 2018; repeal corporate AMT
Implications for local real estate markets will vary. Vacation homes will likely become more expensive and legislation will favor real estate investors (via LLCs and partnerships).
Best to wait and see what actually happens in Congress in the weeks ahead. Stay tuned!