On December 22, 2017, Congress passed the Tax Cuts and Jobs Act. President Trump signed into law the most sweeping U.S. tax legislation in more than 30 years. The law, which takes effect in 2018, creates wide-ranging changes for individuals at all income levels, as well as for corporations.
Most notably, individuals will see:
- Changes to marginal tax rates and brackets
- More limits on itemized deductions but a significantly higher standard deduction
- Deductions for income from LLCs, S Corporations, and other pass-through entities
- A doubling of the amount of wealth that can be passed to younger generations without incurring estate or gift tax
Corporations will see:
- Tax rate decrease from 35% to 21%
- Limits on interest deductions
- Changes in how foreign profits are taxed
Many of the changes for individuals, however, are scheduled to sunset after 2025, a concession that Republicans made to allow the bill to avoid being filibustered in the Senate.
The new legislation creates several planning opportunities for high-net-worth individuals to consider. We provide an overview of the changes for individuals and businesses, and look at how the reforms could affect tax strategies in 2018 and beyond.