Tax Reform Resource Center



On Friday, December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act(1) into law. This law represents one of the most significant revisions to the Internal Revenue Code in more than 30 years. Many provisions included in the Act take effect January 1, 2018, and will affect virtually all U.S. taxpayers, including individuals, businesses, exempt organizations and trusts and estates. BKD’s Tax Reform Resource Center is here to inform you of recent developments and provide you with resources on provisions that may affect your tax situation.

If you have any questions, contact your trusted BKD advisor or Jesse Palmer at 417.831.7283 or jpalmer@bkd.com.

(1)An Act to Provide for Reconciliation Pursuant to Title II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018

Comparison of significant provisions of the Tax Cuts and Jobs Act to previous tax law. Unless stated otherwise, these provisions generally apply to tax years beginning after 2017.

Click here for a printable version of the charts below

Business Provisions

Business Provisions

Topic

Previous Tax Law

New Tax Law

Corporate tax rate

Top rate of 35 percent

Flat rate of 21 percent (effective 1/1/2018)

Pass-through tax rate

Individual rate on ordinary income

Deduction of 20 percent of domestic qualified business income (QBI); subject to limitation(1); expires after 12/31/2025

Alternative Minimum Tax (AMT)

20 percent

Repealed; AMT credits refundable from 2018 through 2021

Personal service corporations

Flat rate of 35 percent

Flat rate of 21 percent

Dividends received deduction

70 & 80 percent deduction for any dividend received from corporations owning <20 or ≥20 percent of stock of another corporation, respectively(2)

Deduction amounts reduced to 50 & 65 percent for corporations owning <20 or ≥20 percent of stock of another corporation, respectively(2)

Bonus depreciation

40, 30 & 20 percent bonus depreciation for qualified property in 2018–2020, respectively; property must be new to qualify

100 percent through 2022 for qualified property placed in service after 9/27/2017(3); 80, 60, 40 & 20 percent bonus depreciation for property placed in service in 2023–2026, respectively; excludes certain property used in regulated public utility businesses & property used in a trade or business that has floor plan financing indebtedness; includes qualified film, television & live theatrical productions

Section 179 expensing

Up to $520,000; phaseout beginning at $2,070,000 of assets placed in service

Up to $1 million; phaseout beginning at $2.5 million of assets placed in service(4)

Cost recovery for residential rental & nonresidential real property

27.5 years for residential rental real property & 39 years for nonresidential real property 

Maintains current law recovery periods for residential rental real property & nonresidential real property; 30 year alternative depreciation system (ADS) recovery period for residential rental property

Like-kind exchanges

Deferral of gain permitted on like-kind exchanges of certain property held for productive use in a trade or business or for investment

Limit deferral of gain on like-kind exchanges to real property that is not held primarily for sale

Interest expense

Deduction allowed for interest expense

Deduction limited to business interest income, floor plan financing interest & 30 percent of entity’s adjusted taxable income; excess carried forward indefinitely(5)

Required application of §263A uniform capitalization rules to inventory

Gross receipts > $10 million for property acquired for resale; no threshold for manufactured property

Gross receipts > $25 million for property acquired for resale or manufactured property

Required use of percentage-of-completion method for long-term contracts

Gross receipts > $10 million

Gross receipts > $25 million

Net operating loss (NOL)

Carried back two years & carried forward 20 years

Deduction limited to 80 percent of taxable income for tax periods after 2017; no carryback; carried forward indefinitely

Retains current law treatment for property and casualty insurance companies

Cash method of accounting

Allowed for C corporations that do not exceed a $5 million gross receipts test

C corporations with less than $25 million of gross receipts

Entertainment expenses(6)

Deduction limited to 50 percent of expense

No deduction for amounts paid or incurred after December 31, 2017

S corporation conversion to C corporation

Not addressed

Distributions from an eligible terminated S corp treated as paid from accumulated adjustments account & earnings & profits on a pro rata basis; §481(a) adjustments taken into account ratably over six-year period; applies to S corps that revoke elections during two-year period following enactment date

Deduction for domestic production activities

Up to 9 percent for domestic production activities

Repealed (effective for taxable years beginning after 12/31/2017)

Research & development credit

Tax credit available to businesses that develop new or improved products or processes

Explicitly retained(7)

Low income housing credit

Tax credit available to owners of qualified residential rental buildings in low-housing projects

No change

Work opportunity tax credit

Nonrefundable tax credit for 40 percent of qualifying wages paid to certain employees who qualify as members of disadvantaged groups

No change

Qualified opportunity zones

Not addressed

Deferral/permanent exclusion of capital gains reinvested in a corporation or partnership that invests at least 90% of its assets in qualified opportunity zone property, which are targeted at certain low-income community population census tracts to be established in each state

Employer credit for paid family & medical leave

Not addressed

Tax credit available to eligible employers of 12.5 percent of wages paid to qualifying employees during any period such employees are on family & medical leave if payment rate under program is 50 percent of wages normally paid(8)

Unused business credits

Deduction allowed for unused business credits; carried back one year; carried forward 20 years

No change

Deduction for settlements paid in connection with sexual harassment or sexual abuse

Generally deductible as ordinary & necessary trade or business expense

No deduction for settlement, payout or attorney fees related to sexual harassment or sexual abuse if payments subject to a nondisclosure agreement

Untaxed accumulated foreign earnings

Not addressed

15.5 percent for cash/cash equivalents, 8 percent otherwise, payable over eight years

Future foreign earnings

Worldwide income tax based on residence & source

Territorial system with base erosion provisions(9) (10)

Interest-charge domestic international sales corporation (IC-DISC)

Taxation on profits generated by small U.S. manufacturers from U.S.-manufactured products sold overseas can be deferred indefinitely & reinvested into business

Retained

  1. Deduction does not apply to specified service businesses, except in case of taxpayer whose taxable income does not exceed $157,500 for single filers ($315,000 married filing jointly (MFJ)) with a phaseout beginning at the same levels over the next $50,000 ($100,000) of taxable income. QBI is all domestic business income other than investment income (except income from publicly traded partnerships that’s eligible for inclusion), investment interest income (other than qualified real estate investment trust & corporate dividends), net capital gain, foreign currency gains, etc. The deduction is limited to the greater of 50 percent of W-2 wages paid with respect to the business or 25 percent of W-2 wages paid plus 2.5 percent of the unadjusted basis of all qualified property.
  2. Deduction is 100 percent of dividend received where member of the same affiliated group.
  3. Definition of qualified property expanded by removing requirement that original use begin with taxpayer
  4. Definition of qualified property expanded to include certain improvements to nonresidential real property, including roofs, HVAC systems, fire protection & alarm systems & security systems.
  5. Adjusted taxable income is without regard to items not properly allocable to a trade or business, any business interest expense or business interest income, the 20 percent pass-through income deduction, floor plan financing interest, any NOL deduction and, for taxable years beginning before January 1, 2022, any deduction for depreciation, amortization or depletion. Interest deduction not limited for any taxpayer that meets a $25 million gross receipts test, is a regulated public utility business (including electric cooperatives) or a real property business. Farming businesses may elect not to be subject to limitation provided they use ADS method to depreciate farming property with recovery period of 10 years or more. Electing farming business specifically include agricultural and horticultural cooperatives.
  6. Includes entertainment, amusement or recreation activities; does not include qualified meal expenses
  7. For tax periods beginning after December 31, 2021, certain research & experimentation expenditures, including software development costs but excluding land acquisition & improvement costs & mine (including oil & gas) exploration costs, would be required to be capitalized & amortized over a five-year period. For foreign research projects, this amortization period increases to 15 years. Upon retirement, abandonment or disposition of property, any remaining basis would continue to be amortized over remaining amortization period.
  8. Credit increased by 0.25 percentage points (but not above 25 percent) for each percentage point by which rate of payment exceeds 50 percent. Credit is effective for wages paid in tax years beginning after December 31, 2017 and before tax years beginning after December 31, 2019.
  9. 100 percent of foreign-sourced portion of dividends paid by foreign corporation to U.S. corporate shareholder owning 10 percent or more of foreign corporation’s stock exempt from U.S. taxation. No foreign tax credit or deduction allowed for any foreign taxes paid or accrued with respect to any exempt dividend.
  10. Provides an election to preserve NOLs & coordinate NOL, overall foreign loss & foreign tax credit carryforward rules upon transition.

Insurance Company Provisions

Insurance Company Proposals

Topic

Previous Tax Law

New Tax Law

General Provisions

Corporate tax rate

Top rate of 35 percent

Flat rate of 21 percent (effective January 1, 2018)

Alternative minimum tax (AMT)

20 percent

Repealed; AMT credits refundable from 2018–2021

Dividends received deduction

70 & 80 percent deduction for any dividend received from corporations owning < 20 or ≥ 20 percent of stock of another corporation, respectively(1)

Deduction amounts reduced to 50 & 65 percent for corporations owning < 20 or ≥ 20 percent of stock of another corporation, respectively(1)

Bonus depreciation

40, 30 & 20 percent bonus depreciation for qualified property in 2018–2020, respectively; property must be new to qualify

100 percent through 2022 for qualified property placed in service after September 27, 2017(2); 80, 60, 40 & 20 percent bonus depreciation for property placed in service in 2023–2026, respectively

Section 179 expensing

Up to $520,000; phaseout beginning at $2,070,000 of assets placed in service

Up to $1 million; phaseout beginning at $2.5 million of assets placed in service(3)

Interest expense

Deduction allowed for interest expense

Deduction limited to business interest income, floor plan financing interest & 30 percent of entity’s adjusted taxable income; excess carried forward indefinitely(4)

Net operating loss (NOL)

Carried back two years & carried forward 20 years

Deduction limited to 80 percent of taxable income for tax periods after 2017; no carryback; carried forward indefinitely.

Retains current law treatment for property & casualty (P&C) insurance companies & permits NOL deductions for life insurance companies(5)

Deferred compensation

Employee compensation not includable in gross income until year of receipt; employer deduction allowed at that time

No change

§162(m) deduction for excessive employee remuneration

Deduction for compensation paid or accrued with respect to a covered employee of a publicly traded corporation limited to no more than $1 million per year. Commissions, performance-based remuneration & payments to a tax-qualified retirement plan are excluded from this limitation

Redefines covered employee; covered employees maintain that distinction for all future years; repeals the performance-based compensation exception

Accounting methods – tax year of inclusion

For an accrual-basis taxpayer, an amount is included in gross income when all events have occurred that fix the right to receive such income & the amount thereof can be determined with reasonable accuracy (the “all events test,” unless an exception applies)

Accrual-basis taxpayers would be required to recognize income no later than the tax year in which item is recognized as revenue on the applicable financial statement; this change may limit the §1276 treatment to defer market discounts for tax purposes

Insurance Company Provisions (Other than life)

Proration rules

P&C insurance companies required to reduce reserve for losses incurred deduction by 15 percent of tax-exempt interest, deductible portion of dividends received & increase in cash value of life insurance, endowment or annuity contracts owned by company

Proration factor changed to “applicable percentage” of 5.25 percent divided by top corporate tax rate, i.e., 25 percent beginning in 2018

Loss reserve discounting

Loss payment pattern for each line of insurance business determined by reference to industrywide historical loss payment pattern applicable to such line of business; may elect to use own particular historical loss payment patterns

Historical payment pattern election repealed

Nonlife tax reserves

P&C companies must discount deduction for unpaid losses based on loss payment pattern using midterm applicable federal rates(6)

Amount of unpaid losses discounted using corporate bond yield curve (as specified by the U.S. Department of the Treasury)(7)

Section 847 special loss discount account

P&C companies may elect to claim a deduction equal to difference between amount of reserves computed on a discounted basis & amount computed on an undiscounted basis(8)

Repealed

Life Insurance Company Provisions

Company & policyholder share percentages

Complex calculation based on company’s share of net investment income

Company’s share is 70 percent; policyholder’s share is 30 percent

Small life insurance company deduction

Life insurance companies with assets < $500 million may deduct 60 percent of first $3 million of life insurance-related income; deduction is phased out for companies with income between $3 & $15 million

Repealed

Life insurance surtax

No surtax on life insurance companies currently exists

No change

Deferred acquisition costs

1.75 percent for annuities; 2.05 percent for group life;

7.7 percent for other specified insurance contracts; 60-month & 120-month amortization periods based on premium level

2.09 percent for annuities; 2.45 percent for group life; 9.2 percent for other specified insurance contracts; expands 120-month amortization period to 180 months; preserves 60-month amortization of the first $5 million (with phaseout)

Life insurance tax reserves

Actuarial-based tax reserves; can’t be less than contract’s cash surrender value; can’t be greater than statutory reserve

Tax reserves for any contract equal to greater of (1) net surrender value of contract or (2) 92.81 percent of reserve computed as required by the National Association of Insurance Commissioners (NAIC) at time reserve is determined. Tax reserves can’t be less than contract’s cash surrender value or greater than the statutory reserve

Adjustment for change in computing life insurance reserves (§807(f))

Adjustments in computing reserves may be taken into account over 10 years, regardless of effect on taxable income

Adjustments treated as a change in method of accounting; subject to §481 rules

Policyholders surplus account (PSA)

Special rule for distributions from pre-1984 PSAs provides tax deferral opportunity(9)

Eight-year inclusion of PSA balances

  1. Deduction is 100 percent of dividend received where member of the same affiliated group.
  2. Definition of qualified property expanded by removing requirement that original use begin with taxpayer.
  3. Definition of qualified property expanded to include certain improvements to nonresidential real property, including roofs, HVAC systems, fire protection and alarm systems and security systems.
  4. Adjusted taxable income is without regard to items not properly allocable to a trade or business, any business interest expense or business interest income, the 20 percent pass-through income deduction, floor plan financing interest, any NOL deduction and, for taxable years beginning before January 1, 2022, any deduction for depreciation, amortization or depletion. Interest deduction not limited for any taxpayer that meets a $25 million gross receipts test, is a regulated public utility business (including electric cooperatives) or a real property business. Farming businesses may elect not to be subject to limitation provided they use ADS method to depreciate farming property with recovery period of 10 years or more. Electing farming businesses specifically include agricultural and horticultural cooperatives.
  5. NOLs for any tax year are generally excess of life insurance deductions over life insurance gross income for that year. Deduction is limited to 80 percent of the excess and can be carried forward indefinitely (no carryback).
  6. Loss payment pattern computed based upon assumption that all losses are paid (1) in general, during the accident year and the three calendar years following the accident year, or (2) in the case of lines of business relating to auto or other liability, medical malpractice, workers’ compensation, multiple peril lines, international coverage and reinsurance, during the accident year and 10 calendar years following the accident year. For long-tail lines of business, a special rule extends the loss payment pattern period, so the amount of losses that would have been treated as paid in the tenth year after the accident year is treated as paid in the tenth year and in each subsequent year (up to five years) in an amount equal to the amount of the losses treated as paid in the ninth year after the accident year.
  7. Amount of losses that would have been treated as paid in the third year after the accident year treated as paid in third year and in each subsequent year in an amount equal to the average of the amount of the losses treated as paid in the first and second years after the accident year, and in the case of lines of business relating to auto or other liability, medical malpractice, workers’ compensation, multiple peril lines, international coverage and reinsurance, the amount of losses that would have been treated as paid in the tenth year after the accident year would be treated as paid in the tenth year and in each subsequent year in an amount equal to the average of the amount of the losses treated as paid in the seventh, eighth and ninth years after the accident year; would result in a lower tax deduction for reserves.
  8. Companies that make this election are required to make a special estimated tax payment equal to the tax benefit attributable to the deduction. Amounts added to the special loss discount account are automatically subtracted from the account and made subject to tax if they have not already been subtracted after 15 years.
  9. Tax rules for insurance companies enacted in 1959 included a rule that half of a life insurer’s operating income was taxed only when the company distributed it, and a PSA kept track of untaxed income. In 1984, this deferral of taxable income was repealed, although existing policyholders’ surplus account balances remained untaxed until they were distributed. Legislation enacted in 2004 provided a two-year holiday that permitted tax-free distributions of these balances during 2005 and 2006.

Individual Provisions

Individual Proposals

Topic

Previous Tax Law

New Tax Law

Individual rates on ordinary income(1)

Seven brackets with top rate of 39.6 percent*

Seven brackets with top rate of 37 percent*^

Capital gains rate

Top rate of 20 percent*

No change

Non-passive losses from flow-through entity

Deductible to extent sufficient tax basis exists

Non-passive losses limited to $250,000 ($500,000 MFJ); excess loss treated as NOL & carried forward

Carried interest

Capital gains rate after one-year holding period for interests received in exchange for performance of services

Capital gains rate after three-year holding period

Identification of shares of stock sold, exchanged or otherwise disposed of

Taxpayers may use either a first-in, first-out (FIFO) or specific identification method when less than entire holding of particular stock is sold, exchanged or otherwise disposed of

No change

Alternative Minimum Tax

28 percent top rate; exemption of $55,400 for single filers ($86,200 MFJ); exemption amounts begin to phase out at $123,100 & $164,100, respectively

28 percent top rate; exemption of $70,300 for single filers ($109,400 MFJ) beginning after 12/31/2017; exemption amounts begin to phase out at $500,000 & $1 million, respectively^

Affordable Care Act individual mandate

Individuals not covered by health plan that provides at least minimum essential coverage must pay individual shared responsibility payment(2)

Individual shared responsibility payment reduced to zero for months beginning after 12/31/2018

Discharge of certain student loan indebtedness

Generally included in taxable income unless certain exceptions apply

Income from discharge of student loan debt on account of death or total & permanent disability of student excluded from taxable income

Standard deduction

$6,500 for single filers, $9,550 head of household & $13,000 MFJ(3)

$12,000 for single filers, $18,000 head of household & $24,000 MFJ)^

Personal exemption

$4,150(3)

Repealed^

Exclusion for gain from sale of principal residence

Exclusion up to $250,000 for single filers ($500,000 MFJ) of gain from sale of principal residence where home used as principal residence for at least two of previous five years

No change

Recharacterization of certain IRS & Roth IRA contributions

Contributions to a traditional IRA permitted to be recharacterized as contribution to a Roth IRA or vice versa; permits recharacterization of conversions

Recharacterization can’t be used to unwind Roth IRA conversions

Child tax credit

$1,000; phaseout at $75,000 for single filers ($110,000 MFJ)

$2,000 ($1,000 refundable); phase out beginning at $200,000 for single filers ($400,000 MFJ)

Family flexibility credit

Not addressed

$500 nonrefundable credit for dependents other than qualifying children; phaseout at $200,000 for single filers ($400,000 MFJ) (6)

Education tax credits

Three higher education tax credits provided:  American Opportunity Tax Credit (AOTC), Hope Scholarship Credit & Lifetime Learning Credit

Elementary & secondary school expenses up to $10,000 treated as qualified expenses for §529 plans(4)

Above-the-Line Deductions

Educator expense

Deduction up to $250 ($500 MFJ) for qualified expenses paid by eligible educators

No change

Qualified moving expenses

Deduction for expense paid for moving at least 50 miles in connection with a job or business

Repealed(4)

Alimony paid

Deduction for qualifying amounts paid under a divorce or separation instrument

Repealed (both deduction & income inclusion); effective for divorce decrees executed after December 31, 2018

Student loan interest deduction

Deduction for qualified student loan interest paid during year for nondependent taxpayers with adjusted gross income (AGI) less than $80,000 single ($160,000 MFJ)

No change

Tuition & fees

Deduction for qualified tuition & fees paid during year

No change

Itemized Deductions#

Medical & dental expense

Deduction for out-of-pocket expenses paid or incurred during year to extent expenses exceed 10 percent of AGI

For 2017 & 2018, deduction for out-of-pocket expenses paid or incurred during year to extent expenses exceed 7.5 percent of AGI; threshold raises to 10 percent of AGI beginning in 2019

State and local taxes paid or accrued not in connection with a trade or business

Deduction for: 1) State, local & foreign real property taxes, 2) State and local personal property taxes & 3) state & local income taxes (or state & local sales tax paid, if higher)

Deduction limited to $10,000 for the aggregate of: 1) State & local real and personal property taxes & 2) State and local income tax (or state and local sales tax paid, if higher)(4)

Home mortgage interest expense

Deduction for mortgage interest paid or incurred on up to $1 million of acquisition indebtedness & $100,000 of home equity indebtedness

Deduction for mortgage interest paid or incurred on up to $750,000 of acquisition indebtedness; deduction for interest paid on home equity loans eliminated(5)

Gifts to charity

Deduction for charitable contributions made during year; deduction for cash contributions limited to 50 percent of AGI

Deduction for cash contributions modified to increase AGI limitation to 60 percent(4)(6)

Personal casualty & theft losses

Deduction for casualty & theft losses incurred

Eliminated except  for losses incurred within a major disaster area under the Robert T. Stafford Disaster Relief & Emergency Assistance Act of 2016(4)

Miscellaneous itemized deductions subject to 2% of AGI floor

Deduction for tax preparation fees, unreimbursed employee expenses & other miscellaneous items paid during year to extent they exceed 2 percent of AGI

Repealed(4)

    * Plus 3.8 percent net investment income tax on unearned income when modified adjusted gross income exceeds $200,000 for single filers ($250,000 MFJ).

    ^ Expires after December 31, 2025, except amounts would continue to be indexed for inflation using chained measurement of the consumer price index where applicable.

    # Subject to phase-out based on AGI under current law. This limitation would be repealed except would revert back to its form before January 1, 2018, after December 31, 2025

  1. See also Individual Tax Brackets tab below.
  2. Tax imposed for any month an individual does not have minimum essential coverage unless an exception applies. Tax for any calendar month is one-twelfth of tax calculated as an annual amount. Annual amount is equal to greater of flat dollar amount (lesser of sum of individual annual dollar amounts for members of taxpayer’s family or 300 percent of adult individual dollar amount of $695 for 2018) or excess income amount (2.5 percent of excess of taxpayer’s household income for taxable year over threshold amount of income for requiring taxpayer to file income tax return).
  3. Subject to phaseout based on AGI under current law. This limitation would be repealed under the conference agreement, except would revert back to its form before January 1, 2018, after December 31, 2025.
  4. Reverts back to its form before January 1, 2018, after December 31, 2025.
  5. Interest deductions for existing mortgages would remain unchanged.
  6. Would repeal exception to contemporaneous written acknowledgement requirement for contributions of $250 or more when done organization files required return effective for contributions made in tax years beginning after December 31, 2016.

Individual Brackets

Individual Brackets

Single

2018 Ordinary Rates

2018 Capital Gains Rates

Bracket

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

$0–$9,525

10%

10%

0%

0%

9,526–38,600

15%

12%

0%

0%

38,601–38,700

15%

12%

0%

15%

38,701–82,500

25%

22%

15%

15%

82,501–93,700

25%

24%

15%

15%

93,701–157,500

28%

24%

15%

15%

157,501–195,450

28%

32%

15%

15%

195,451–200,000

33%

32%

15%

15%

200,001–424,950

33%

35%

15%

15%

424,951–425,800

35%

35%

15%

15%

425,801–426,700

35%

35%

15%

20%

426,701–500,000

39.6%

35%

20%

20%

More than 500,000

39.6%

37%

20%

20%

Head of Household

2018 Ordinary Rates

2018 Capital Gains Rates

Bracket

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

$0–$13,600

10%

10%

0%

0%

13,601–51,700

15%

12%

0%

0%

51,701–51,800

15%

12%

0%

15%

51,801–51,850

15%

22%

0%

15%

51,851–67,500

25%

22%

15%

15%

67,501–82,500

25%

22%

15%

15%

82,501–133,850

25%

22%

15%

15%

133,851–157,500

28%

24%

15%

15%

157,501–200,000

28%

32%

15%

15%

200,001–216,700

28%

35%

15%

15%

216,701–424,950

33%

35%

15%

15%

424,951–452,400

35%

35%

15%

15%

452,401–453,350

35%

35%

15%

20%

453,351–500,000

39.6%

35%

15%

20%

More than 500,000

39.6%

37%

20%

20%

Married Filing Separately

2018 Ordinary Rates

2018 Capital Gains Rates

Bracket

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

$0–$9,525

10%

10%

0%

0%

9,526–38,600

15%

12%

0%

0%

38,601–38,700

15%

12%

0%

15%

38,701–45,000

25%

22%

15%

15%

45,001–70,000

25%

22%

15%

15%

70,001–78,075

25%

22%

15%

15%

78,076–82,500

28%

22%

15%

15%

82,501–118,975

28%

24%

15%

15%

118,976–157,500

33%

24%

15%

15%

157,501–200,000

33%

32%

15%

15%

160,001–200,000

33%

32%

15%

15%

200,001–212,475

33%

35%

15%

15%

212,476–240,025

35%

35%

15%

15%

240,026–300,000

39.6%

35%

20%

15%

300,001–425,800

39.6%

37%

20%

20%

More than 425,800

39.6%

37%

20%

20%

Married Filing Jointly

2018 Ordinary Rates

2018 Capital Gains Rates

Bracket

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

Current Law*

Tax Reconciliation Act (Conference Agreement)*^

$0–$19,050

10%

10%

0%

0%

19,051–77,200

15%

12%

0%

0%

77,201–77,400

15%

12%

0%

15%

77,401–156,150

25%

22%

15%

15%

156,151 – 165,000

28%

22%

15%

15%

165,001–237,950

28%

24%

15%

15%

237,951–315,000

33%

24%

15%

15%

315,001–400,000

33%

32%

15%

15%

400,001–424,950

33%

35%

15%

15%

424,951–479,000

35%

35%

15%

15%

479,001–480,050

35%

35%

15%

20%

480,051–600,000

39.6%

35%

20%

20%

More than 600,000

39.6%

37%

20%

20%

    * Plus 3.8 percent net investment income tax on unearned income when modified adjusted gross income exceeds $200,000 for single filers ($250,000 MFJ). Bracket income levels would be inflation adjusted based on a chained measurement of the Consumer Price Index.

    ^ Expires after December 31, 2025.

Transfer Provisions

Transfer Provisions

Topic

Previous Tax Law

New Tax Law

Estate tax

40 percent rate with $5.6 million basic exclusion amount per taxpayer(1)

40 percent rate with $11.2 million basic exclusion amount per taxpayer^(1)

Gift tax

40 percent rate with $5.6 million basic exclusion amount per taxpayer(1); $15,000 annual exclusion(2)

40 percent rate with $11.2 million basic exclusion amount per person(1); $15,000 annual exclusion retained^(2)

Generation-skipping transfer tax

40 percent rate with $5.6 million basic exclusion amount per taxpayer(1)

40 percent rate with $11.2 million basic exclusion amount per taxpayer^(1)

    ^ Expires after December 31, 2025, and reverts back to amounts provided prior to January 1, 2018, except amounts would continue to be indexed for inflation using chained measurement of the consumer price index where applicable.

  1. Basic exclusion amount adjusted for inflation annually.
  2. Annual exclusion amount adjusted for inflation annually.

Exempt Organizations Proposals

Exempt Organizations Tax Proposals

Topic

Previous Tax Law

New Tax Law

Executive compensation

Not addressed

21 percent excise tax on compensation over $1 million paid to five highest-paid employees(1)

Excise tax on private colleges & universities(2)

Not addressed

1.4 percent on net investment income

Excise tax on private foundations

Two-tier excise tax rate system (2 percent on net investment income; reduced to 1 percent in certain cases)

No change

Taxation of private activity bond interest

Tax-exempt

No change

Unrelated business income (UBI)

Subject to UBI tax

Organization operating multiple unrelated business activities may not offset losses of one activity against income of another activity

  1. Would not apply with respect to any remuneration under written binding contracts in effect on November 2, 2017, that isn’t modified in any material respect.
  2. Applies to institutions with 500 or more students & assets with a value of at least $500,000 per full-time student, not including those used directly in carrying out the institution’s educational purpose. Assets and related net investment income of related organizations would be treated as part of the private college or university. Only applies to institutions with more than 50 percent of their students located within the U.S.

Thoughtware Articles


Tax change may impact you, your family and your business.

Construction & Real Estate

Financial Services

Health Care

Insurance

Manufacturing & Distribution

Not-for-Profit

Private Client Services

Private Equity

Links to the Tax Bills


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