The Tax Cuts and Jobs Act, H.R. 1, released by the House Ways and Means Committee on Thursday, contains a large number of provisions. Many of these would affect individual taxpayers if the bill is enacted.
These provisions include new tax rates and a larger standard deduction and the repeal of many deductions, credits, and exclusions that are available under current law. The bill would also repeal the estate and generation-skipping transfer (GST) taxes and the alternative minimum tax (AMT).
Capital gains: Capital gains below $77,200 for married taxpayers filing jointly, $38,600 for married taxpayers filing separately and single taxpayers, $51,700 for heads of household, and $2,600 for trusts and estates will be taxed at 0%.
Capital gains below $479,000 for married taxpayers filing jointly, $239,500 for married taxpayers filing separately, $425,800 for single taxpayers, $452,400 for heads of household, and $12,700 for trusts and estates will be taxed at 15%. These amounts will be adjusted for inflation after 2018.
Standard deduction: The standard deduction would increase from $6,350 to $12,200 for single taxpayers and from $12,700 to $24,400 for married couples filing jointly, effective for tax years after 2017. Single filers with at least one qualifying child would get an $18,300 standard deduction. These amounts will be adjusted for inflation after 2019.
Personal exemptions: The deduction for personal exemptions, currently at $4,050 per person, would be repealed after 2017.
Passthrough income: Under a new Sec. 4, a portion of business income distributed by a passthrough entity, such as a partnership, S corporation, or limited liability company, would be taxed at a maximum rate of 25%, instead of at ordinary individual income tax rates, effective for tax years after 2017. The rest of the business’s passthrough income would be treated as compensation and would be subject to ordinary individual tax rates.
Capital gains: Capital gains below $77,200 for married taxpayers filing jointly, $38,600 for married taxpayers filing separately and single taxpayers, $51,700 for heads of household, and $2,600 for trusts and estates will be taxed at 0%.
Capital gains below $479,000 for married taxpayers filing jointly, $239,500 for married taxpayers filing separately, $425,800 for single taxpayers, $452,400 for heads of household, and $12,700 for trusts and estates will be taxed at 15%. These amounts will be adjusted for inflation after 2018.
Standard deduction: The standard deduction would increase from $6,350 to $12,200 for single taxpayers and from $12,700 to $24,400 for married couples filing jointly, effective for tax years after 2017. Single filers with at least one qualifying child would get an $18,300 standard deduction. These amounts will be adjusted for inflation after 2019.
Personal exemptions: The deduction for personal exemptions, currently at $4,050 per person, would be repealed after 2017.
Passthrough income: Under a new Sec. 4, a portion of business income distributed by a passthrough entity, such as a partnership, S corporation, or limited liability company, would be taxed at a maximum rate of 25%, instead of at ordinary individual income tax rates, effective for tax years after 2017. The rest of the business’s passthrough income would be treated as compensation and would be subject to ordinary individual tax rates.
