At Maddox Thomson, we have been tracking anticipated tax law changes proposed by President Trump from the time of his election back in November of 2016. Since that date, there have been several proposed plans introduced by Congress, and we continue to monitor how these will affect individual and corporate taxpayers.
Today, there are seven tax brackets for individuals, 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent. The following chart represents the projected 2018 rates, based on current law:
Single Filing Status, 2018 Married Filing Joint, 2018 Head of Household, 2018
Rate Taxable Income Rate Taxable Income Rate Taxable Income
10% $0 to $9,525 10% $0 to $19,050 10% $0 to $13,600
15% $9,526 to $38,700 15% $19,051 to $77,400 15% $13,601 to $51,850
25% $38,701 to $93,700 25% $77,401 to $156,150 25% $51,851 to $133,850
28% $93,701 to $195,450 28% $156,151 to $237,950 28% $133,851 to $216,700
33% $195,451 to $424,950 33% $237,951 to $424,950 33% $216,701 to $424,950
35% $424,951 to $426,700 35% $424,951 to $480,050 35% $424,951 to $453,350
39.6% $426,701+ 39.6% $480,051+ 39.6% $453,351+
The latest plan released on November 2nd, The Tax Cuts and Jobs Act, offers to reduce the number of tax brackets from seven down to four, 12 percent, 25 percent, 35 percent, and 39.6 percent. The following chart represents the proposed tax rates and income brackets:
Single Filing Status, 2018 Married Filing Joint, 2018 Head of Household, 2018
Rate Taxable Income Rate Taxable Income Rate Taxable Income
12% $0 to $44,999 12% $0 to $89,999 12% $0 to $67,499
25% $45,000 to $199,999 25% $90,000 to $259,999 25% $67,500 to $199,999
35% $200,000 to $499,999 35% $260,000 to $999,999 35% $200,000 to $499,999
39.6% $500,000+ 39.6% $1,000,000+ 39.6% $500,000+
The Tax Cuts and Jobs Act would increase the standard deduction in 2018 from $6,500 to $12,200 for single filers, $13,000 to $24,400 for joint married filers, and $9,550 to $18,300 for heads of household filers. Personal exemptions would be repealed, as will deductions for state and local income and sales taxes. Charitable contribution, property tax with a cap of $10,000, and mortgage interest deductions will be retained. New limitations on mortgage interest, on loans after November 2, 2017, would be imposed.
The plan also includes a reduction in the corporate income tax rate from 35 percent to 20 percent, and proposes a special 25 percent tax rate on certain pass-through business income (subject to anti-abuse rules). The plan would eliminate the Alternative Minimum Tax “AMT” for both individual and corporate taxpayers, and ultimately repeal the federal estate tax.
Stay tuned for updates as the House Ways and Means Committee commence their markup of the bill, and we continue to learn more. If you would like to see how these proposed changes might affect you, please contact one of our tax professionals.
