H.R. 1, known as the Tax Cuts and Jobs Act (TCJA), was passed by both houses of Congress on December 20, 2017. The bill was signed into law by President Trump on December 22nd.
TCJA isn’t reform of the same magnitude as the 1986 tax act, but it is quite broad and includes many nuances.
The reconciliation of the House and Senate bills came very late, very fast. As a result, we have not completed deep analysis. Most changes go into effect for tax years beginning after December 31, 2017. Note most individual provisions are set to expire after 2025.
As a general rule, marginal rates for both businesses and individuals will decrease in 2018 which likely makes deductions more valuable in 2017.
For individuals, while TJCA repealed the overall limitation on itemized deductions, many deductions will be capped or eliminated. For example, home-equity loan interest and miscellaneous itemized deductions subject to the 2% floor under current law have been repealed through 2025; state and local income or property taxes will be capped at $10,000. Acceleration of payments for these expenses due in January into December should be beneficial - especially for individuals who will not itemize deductions in the future as a result of the increased standard deduction. One caveat, prepaying 2018 state income taxes is specifically disallowed by TJCA.
We will continue to analyze and provide updates on various aspects of TJCA over the coming weeks. In the meantime, we invite you to call or set an appointment to discuss your particular situation.