Hi, I'm Candace
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Wait, you’re not interested in reading the 600-page tax reform bill? SHOCKING. Below I summarize the main changes for individuals and businesses brought on by the Tax Cuts and Job Act that go into effect this year and break it down between the good, the bad, and the ugly.
1. The bill retains seven brackets, but proposes new rates, lowering the effective tax rate for individuals. The revisions go into effect for 2018 and would phase out after 2025. GOOD… at least until 2025…
2. The standard deduction for a single filer is increased to $12,000 and $24,000 for married couples filing jointly from $6,500 and $13,000, respectively. GOOD!
3. The bill eliminates exemptions for children, but applies a child tax credit of $2,000 per child, with up to $1,400 refundable. Not bad.
4. Itemized Deductions:
1. Corporations are by far seeing the biggest benefit with the top corporate income tax rate of 35% being replaced with a permanent, flat rate of 21%. Very good.
2. The corporate alternative minimum tax (AMT) is eliminated. Also very good.
3. Small businesses (S Corps, LLCs, sole proprietors, and partnerships) will get a 20% deduction on qualified business income. The deduction will be applied before the income lands on the owner’s individual return and taxed at the individual rate. Good again… are you noticing a trend?
Candace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances. Because even if money isn’t your jam, you deserve to be successful too!
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