Tax code overhauls are becoming increasingly common in the United States. With the recent passage of the Tax Cuts and Jobs Act, the federal government has made sweeping changes to the tax code that will affect individuals and businesses alike. As a result, it’s important to understand the changes and how they may affect you.
The most significant change to the tax code is the reduction of the corporate tax rate from 35% to 21%. This is expected to provide a major boost to businesses, as they will now be able to keep more of their profits. Additionally, the new law also doubles the standard deduction for individuals, which will reduce the amount of taxable income for many taxpayers.
The new tax code also eliminates or reduces several deductions and credits. For example, the personal exemption has been eliminated, and the state and local tax deduction has been capped at $10,000. Additionally, the mortgage interest deduction has been reduced from $1 million to $750,000.
The new tax code also includes several new provisions that are designed to benefit certain groups of taxpayers. For example, the new law creates a new 20% deduction for pass-through businesses, which are businesses that pass their profits through to their owners. Additionally, the new law also creates a new $2,000 child tax credit, which is designed to help families with children.
Finally, the new tax code also includes several provisions that are designed to simplify the filing process. For example, the new law eliminates the need to itemize deductions, which should make filing taxes much easier for many taxpayers. Additionally, the new law also increases the size of the standard deduction, which should reduce the number of taxpayers who need to itemize.
Overall, the new tax code is a major overhaul of the existing system. While the changes may benefit some taxpayers, they may also have a negative impact on others. As a result, it’s important to understand the changes and how they may affect you. If you have any questions, it’s best to consult a tax professional to ensure that you are taking full advantage of the new law.