So we finally get through Tax Season, sunset the tax discussions until next year, and along comes an announcement that tax reform plans are due out today.
Keep in mind, no one knows for sure what the final outcome will be even after today’s announcements as approval and compromises will ensue.
Here are the high points from our perch.
Standard Deduction Adjustment
An announcement for a large increase in the standard deduction is expected. If passed the net result could be tax savings for many especially those that do not itemize. In our view, this change, if approved would likely have the largest total number of filing changes. Needless to say the tax planning possibilities are huge….
Corporate Tax Changes
There is much anticipation of lowered corporate rates. US corporate tax rates according to many , are too high, a proposal for relief from higher corporate tax rates is expected.
There is also a possibility of smaller, flow through entity corporation, think S corporation income i.e. K-1 tax rate relief.
Our favorite, and hopeful agreed upon, tax change would allow stranded income, already taxed in a foreign country, to move more freely back to the US with less tax burden. International corporations would have greater access to foreign country stranded capital if this were to be approved.
We have heard less of this lately and hope it does not hit the cutting room floor!
Estate Tax Reform
There has been much talk of an Estate Tax reform as well. The gist is a disallowance of a step up in basis but a removal of the $5.49 million Estate tax rate.
If passed as mentioned, and the current tax laws held “as is” on capital gains, this could be a huge nightmare. We think there may be major compromises on this before actually passed. We will keep you posted on this as it develops. This is our least favorite possible reform at this point.
Have a Great “Tax Reform Announcement” Day!
John A. Kvale CFA, CFP