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Tax Reform: What You Need to Know About the Latest Tax Changes

Tax reform is a hot topic in the United States right now, and it’s important to understand the latest changes and how they may affect you. The Tax Cuts and Jobs Act of 2017 was the most sweeping tax reform in decades, and it has changed the way individuals and businesses are taxed. Here’s what you need to know about the latest tax changes.

Individuals

The Tax Cuts and Jobs Act of 2017 made several changes to individual taxes. The most significant change was the reduction of the top individual tax rate from 39.6% to 37%. This means that individuals in the highest tax bracket will pay less in taxes. The standard deduction was also increased from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples filing jointly. This means that more of your income will be taxed at a lower rate.

The Act also eliminated personal exemptions, which were previously $4,050 per person. This means that you can no longer deduct the amount of your personal exemptions from your taxable income. Additionally, the Act limited the amount of state and local taxes that can be deducted from your federal taxes to $10,000.

Businesses

The Tax Cuts and Jobs Act of 2017 also made several changes to business taxes. The most significant change was the reduction of the corporate tax rate from 35% to 21%. This means that businesses will pay less in taxes. The Act also allowed businesses to immediately write off the full cost of certain investments, such as equipment and machinery. This means that businesses can deduct the full cost of these investments from their taxable income.

The Act also created a new deduction for pass-through businesses, such as sole proprietorships, partnerships, and S corporations. This deduction allows these businesses to deduct up to 20% of their qualified business income from their taxable income.

Conclusion

The Tax Cuts and Jobs Act of 2017 was the most sweeping tax reform in decades, and it has changed the way individuals and businesses are taxed. Individuals will benefit from a lower top tax rate and an increased standard deduction, while businesses will benefit from a lower corporate tax rate and the ability to immediately write off certain investments. It’s important to understand how these changes may affect you and your business so that you can take advantage of the new tax laws.

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