President Trump called the $ 1.5 trillion tax cut as Republican lawmakers are about to spend a Christmas present for the entire nation.
But the fine print reveals that some will receive a much more handsome gift than others, the benefits will change over time, and some will be left in the cold. Real estate developers and technology companies could see significant tax cuts, while low-income households and health insurance buyers could lose.
The bill is finally passed next week, taxpayers are struggling the law makes them winners or losers.
THE PRESIDENT TRUMP AND HIS FAMILY Many industries will benefit from Republican tax reform, but perhaps as drastically as the industry where Mr. Trump has earned its wealth: commercial real estate. Mr. Trump, along with his son-in-law Jared Kushner, who is co-owner of his own real estate company, will benefit from a reduction in so-called "pass-through" income taxes, which is the money earned by partnerships and dedicates Other types of businesses whose income is passed on to its owner and taxed at the individual tax rate. Mr. Trump and Mr. Kushner benefit because they own properties through limited liability companies and other similar vehicles
Under the current law, this income is imposed at rates as high as 39.6%. Under the bill, a large portion of this income could be taxed at a rate as low as 29.6%. 100, subject to certain restrictions. The real estate also avoided new limits on interest deductions and retained its ability to defer taxes on the exchange of similar property types. The benefits of lower rates on transfer income will also extend to Trump's and Kushner's partners in real estate investment trusts. At the last minute, legislators have added language to help homeowners avoid certain restrictions of the transmission provision and maximize tax benefits.
BIG CORPORATIONS Large retailers will benefit from the new corporate tax rate of 21%, since these companies pay relatively close to the full rate of 35%. Other sectors of the multinational, including technology and pharmaceutical companies, such as Google, Facebook, Apple, Johnson & Johnson and Pfizer, will benefit from other aspects of corporate tax cuts. These multinational corporations have accumulated close to $ 3 trillion abroad, mainly in tax haven subsidiaries, which have not been affected by the US tax authorities. The bill will require these companies to gradually bring that money home, but it will be taxed at rates ranging from 8% to 15.5%. This is much lower than the current 35% rate on corporate profits and even lower than the new rate of 21%.
In addition, US companies will no longer have to pay corporate taxes. more incentive to push the income in the subsidiaries of tax havens. The law even includes provisions that could encourage companies to move workers overseas, despite promises to do the opposite.
MULTIMILLIONARIES An exemption for estates that owe what Republicans call "death tax" was raised to $ 22 million from $ 11 million. This is not of much importance to billionaires like Charles Koch, but it does mean a big tax cut for people whose estates are worth tens of millions of dollars.
Moreover, the maximum rate applying to wages and interest would be reduced During the campaign, Donald Trump denigrated wealthy investment managers who, thanks to what Call the deferred interest gap, pay taxes on the majority of investment funds. their salary at lower rates of capital gains. But the so-called reform of this tax provision will affect few or no private equity managers, leaving the loophole intact.
PRIVATE SCHOOLS AND PEOPLE WHO CAN ADDRESS THEM Parents would be eligible to use a type of preferential tax savings plan – known as Plan 529 – to save for the primary and secondary education of their children. At present, these savings plans are only eligible for college. But they would be expanded to allow up to $ 10,000 a year for tuition in private and religious schools.
THE LIQUID ENTERPRISE Excise taxes of small brewers and distillers are reduced in the final agreement. These industries are dominated by small entrepreneurial enterprises often based in rural areas. They also have powerful lobbyists, and many are based in states with powerful senators, like Senator Rob Portman of Ohio. Mr. Portman, which contained a provision to help craft brewers become part of the Senate legislation, was part of the small team of legislators who merged the two bills into a final version.
ARCHITECTS AND ENGINEERS Originally, they were restricted to the extent that they could benefit from the new transmission provision. If they structure their businesses in a certain way, the final version will allow them to take full advantage of the benefits
ACCOUNTANTS AND LAWYERS OF TAX Mr. Trump said his "dream" was of business by simplifying the tax code. But hasty legislation will likely have the opposite effect, as individuals try to make sense of complicated new provisions, phased dates and new rates. Uncertainty and confusion will likely create many new opportunities to challenge the system: tax preparers are sure to witness a business boom to advise their clients on how to restructure their jobs and their pay in order to to take advantage of lower tax rates
PEOPLE PURCHASING SICKNESS INSURANCE With the repeal of the individual mandate, some people who currently subscribe to health insurance because they are required by the law of doing so, you must do without cover. According to the Congressional Budget Office, healthier people are more likely to drop their insurance, leaving insurers stuck with more people who are older and sick. This should increase average insurance premiums in the individual market by about 10 percent. In all, 13 million fewer Americans should have health coverage, according to the Congressional Budget Office
INDIVIDUAL TAXPAYERS IN THE FUTURE To stay under the limit of $ 1.5 trillion for themselves, they chose to make temporary cuts for individuals and families, expiring at the end of 2025 – even though corporate tax cuts will be permanent. Republicans are counting on a future Congress to extend lower rates, as happened in the past. But there is no guarantee, and this could lead to a significant increase in taxes later. What's more, the use of a different and less generous inflation measure would push taxpayers faster toward higher tax brackets.
THE SENIORS A 2010 law requires that any legislation adding the federal deficit will be funded by spending cuts, revenue increases, or other offsets. . Some discounts would be automatic, and the biggest program affected would be Medicare, the health insurance program for the elderly and disabled. Dozens of other programs are likely to be cut as well, but Medicare, which is expected to face a 4% reduction, is by far the most important. Republicans say this rule will be lifted and cuts will be avoided, but it will take a bipartisan agreement
LOW-INCOME FAMILIES Low-income families claiming tax on Earned Income Credit will lose at least $ 19 billion over the next decade under the bill because of the change in the way inflation is calculated. And a new requirement that families who apply for the child tax credit provide a social security number should mean a big reduction in the families who claim it, because those who are not legally in the United States would be banned, even if their children are born The United States.
OWNERS OF HIGHER RANGE HOUSES Under the current law, interest on mortgages for primary and secondary residences is deductible for the first million dollars of the loan . The revision would reduce the amount to $ 750,000 and eliminate the possibility for the owner, in the current law, to deduct the interest on a mortgage loan up to a maximum of $ 100,000. This could lower home prices in some high-end markets;
PEOPLE IN HIGHER TAXES, HIGH INCOME STATES Owners of high-tax states such as New York, New Jersey and California could be big losers, especially when they are not taxpayers. they have high property taxes. Their ability to deduct their local property taxes and local and local taxes from their federal tax bills is now capped at $ 10,000. In some cases this could be offset by the lower tax rates that all taxpayers will have on their ordinary income.
PORTO RICO Puerto Rico had applied for an exemption from new taxes, citing the fragile state of its economy nearly three months after Hurricane Maria. But no luck. The bill treats affiliates of US corporations on the island as if Puerto Rico was a foreign country and imposed a 12.5% tax on intellectual property. Puerto Rican Governor Ricardo A. Rosselló said the tax would hurt biomedical and technological affiliates that account for about one-third of Puerto Rico's tax base.
THE INTERNAL REVENUE SERVICE The agency tax collection has been underfunded and understaffed for years. Now he will have a series of new tax rules to deal with that will require upgrading his software, printing new textbooks and explaining to confused taxpayers how things work. All of this should take place while the commission is working under the supervision of an interim commissioner, who should be replaced next year.
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