As tends to happen this time of year, I awoke this morning to find that a friendly Elf had mysteriously manifested itself in my living room. Only this time, Oscar wasn’t alone. He was toting along something else that, like Oscar, wasn’t here when I went to bed, but that had miraculously became a reality as I dozed: 479-pages of brand new tax law.
That’s right…in the wee hours of the night, as visions of corporate cuts and repealed death taxes danced in Paul Ryan’s head, the Senate overcame the last big hurdle as it speeds towards the most significant tax reform in 31 years, passing its version of HR 1 by a 51-49 vote.
The work is not technically done, however, as the House and Senate must agree on a bill. And while there may be some sticking points — the treatment of pass-through businesses, education incentives, and medical expenses to name a few — the path is cleared for the President to achieve his signature legislative victory and sign a $1.5 trillion tax cut package into law, just in time for Christmas.
Here are a few highlights of the plan:
- The top individual rate is reduced from 39.6% to 38.5%, and the threshold at which the top rate kicks in is increased from $418,000 for a single/$480,000 for married filing jointly to $500,000/$1,000,000. Further down the brackets, rates are reduced as well, for full detail, see here.
- The top rate on the income earned by owners of “flow through” businesses — S corporations and partnerships — is reduced from 39.6% to a shade below 30%.
- The standard deduction is doubled from $6,350 for a single/ $12,700 if married to $12,000/$24,000.
- Deductions for personal exemptions are repealed, but the child tax credit is increased from $1,000 to $2,000.
Authored by Tony Nitti, Withum Partner and writer for Forbes.com.