The new tax bill has officially been passed by Congress and signed by President Trump, what does this mean for us? The answer to this depends on many variables discussed here.
First of all, these changes don’t apply until you file your 2018 taxes, meaning that you won’t have to worry about the new law when filing your 2017 income tax returns this spring. That being said, still we will be experiencing the greatest overhaul of the tax laws in more than 30 years. The last major changes having been made under President Reagan in 1986.
One change you can expect to see is that both corporate tax rates and personal income tax rates will drop. There are also other changes which limit or eliminate personal deductions. The changes that affect corporate tax rates are permanent, and the changes that affect individual tax rates and deductions are not.
Also in the new tax bill you will find a “sunset” provision, meaning that the new law – as it applies to individuals – will expire on December 31, 2025. That is, unless Congress agrees to extend the law. That, of course, will depend on the political and economic climate 8 years from now, including whether the economy responds the way Republicans say it will
Now let’s take a look at the changes that are likely to affect the average senior. Good news, the tax rates have been lowered a bit. There are still 7 tax brackets but the rates have changed with the top rate lowered from 39.6% to 37% and the threshold at which each rate is reached has been altered. (The corporate rate reduction is much greater, from 37% to 21%).
Some of the most significant changes relate to deductions. The standard deduction has been doubled to $12,000 for a single person and $24,000 for married couples but personal exemptions have been eliminated. The deduction for state and local taxes will be capped at $10,000, something that could hurt many Massachusetts residents and especially homeowners because we have high real estate and state income taxes.
So Much to Discuss:
For the first time in decades major overhauls to the tax system are happening! This is an enormous change that can affect your estate planning and asset protection as well. Be sure to stay tuned as we will discuss more about this new tax bill in our next blog post!
For more information we encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy. January sessions are filling up fast call or register on line to reserve your seat today.
At the Estate Planning & Asset Protection Law Center, we help people and their families protect their home, spouse, life-savings, and legacy for their loved ones. We provide clients with a unique educational and counseling so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.