The Tax Cuts and Jobs Act

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The Tax Cuts and Jobs Act released by the Conference Committee, that resolved differences in the versions of the Act passed by the Senate and the House of Representatives, is almost certain to be signed into law by the President.  You can read our preliminary summary of this far-reaching tax legislation here, but these are the highlights:

Individuals

  • Tax brackets are adjusted, with the maximum rate reduced from 39.6% to 37%.
  • The mortgage interest deduction on a principal residence is limited to debt of $750,000 (down from $1 million).
  • Several itemized deductions are reduced or eliminated, including state and local taxes (“SALT”) in excess of $10,000.
  • The standard deduction is doubled to $12,000 for single individuals and $24,000 for joint filers.
    More on provisions affecting individuals

Estate and Gift Tax

  • The exemption against estate tax and gift tax is doubled to $11.2 million.
  • 529 plans have been expanded to allow funds to be used for tuition at elementary or secondary schools.
    More on the estate and gift tax provisions

Business Entities

  • The maximum corporate tax rate is permanently reduced from 35% to 21%.
  • Passthrough entities may qualify for a 20% deduction on certain domestic qualified business income.
  • Bonus depreciation or “expensing” has been increased from 50% to 100%.
  • The corporate AMT is repealed.
    More on provisions affecting business entities

Non-Profits & Charitable Giving

  • The limitation for deductibility of cash contributions to public charities is increased from 50% to 60% of adjusted gross income.
  • There will be an excise tax of 1.4% on certain university endowments.
  • The Act imposes a 21% excise tax on nonprofits for executive compensation in excess of $1 million.
    More on the nonprofits and charitable giving provisions

International Tax 

  • The world-wide tax system is replaced with a territorial tax whereby US corporate shareholders can claim a 100% deduction for foreign source dividends.
  • Previously untaxed earnings of foreign subsidiaries are taxed at either 8% or 15.5% and payable over an eight year period.
  • There is a new tax on a controlled foreign corporation’s global intangible low-taxed income.
    More on the international tax provisions

The Act is the most significant structural change to our federal tax system since 1986.  There are many more detailed provisions than contained in this brief summary – some of which will be covered in future blog posts and MSK Tax Alerts.  In the meantime, feel free to contact any member of the MSK Tax Practice Group if we can be of assistance.

David Wheeler Newman
Allan E. Biblin 
Allan B. Cutrow
Jeffrey D. Davine

Jeffrey K. Eisen
Robin C. Gilden
Charles Kolstad
Robert J. Lowe
S. Eva Wolf 
Daniel Cousineau

 

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