Now that this new tax legislation has been enacted by Congress and promulgated by the President, tax experts are taking a closer look at what the Act on Tax Reductions and Removals means for businesses and taxpayers in the USA. few changes you might expect to see regarding your personal and business taxes in 2018:
Effect of immediate pay
With the immediate coming into effect of the tax bill, companies are struggling to make changes to the payroll systems that automatically calculate employee tax deductions. But they can not complete the changes until the IRS releases updated payroll tables and publishes tips for payroll service managers for 2018. The IRS should provide information this month so that companies can retain the correct amounts in February. In the meantime, employers should continue to use the 2017 deduction tables.
Once the IRS has updated the 2018 payroll tables, it will propose a deductions calculator on its website to help companies determine the correct amounts. The IRS also reports that the new tax guidelines will be consistent with existing W-4 forms that employees have already filed, and no further action by taxpayers will be necessary at this time.
Lower corporate tax rate
The new tax law definitely reduces the corporate tax rate from 35% to 21%, effective immediately in 2018. The purpose of this tax break is to align the rate of the tax rate. taxation of US companies over that of competing countries.
Although the company rate reduction applies only to C filers, the new tax law also allows other companies (S corporations, limited liability companies, partnerships and sole proprietorships) to deduct 20 % of their business income. The one exception is service companies, such as physicians and lawyers, who earn more than $ 157,000 ($ 315,000 per year) per year. It is important to note that this "transfer" income deduction expires in 2025, as do the rest of the personal income tax provisions of the Act.
Coupes to personal taxes
The new tax law brings the number of tax brackets to seven, lowering the upper income bracket from 39.6% to 37%. The legislation also doubles the standard deduction (from $ 6,350 to $ 12,000 for individuals and $ 12,700 to $ 24,000 for co-applicants), eliminates the personal exemption and increases tax credits for children. It is now expected that many taxpayers who were in the habit of detailing the deductions will benefit from the higher standard deduction.
Overall, the law should reduce taxes for most employees, although many experts have expressed the view that the law offers relatively greater benefits to high-income taxpayers than ever before. 39 to low and middle income households. term.
Higher taxes in some states
To avoid being overly excited by federal tax relief, at least six states plan to raise taxes in 2018. Hawaii, Illinois, Kansas, Oregon, South Carolina, and Tennessee have all announced tax increases in one form or another. another from road infrastructure to economic development.