The truth is the meaning of the new tax reform is difficult to determine. Today and possibly for some time.
While the Trump-GOP tax plan has made progress, the road to passage will assuredly be long, winding, and pothole-laden. The plan very likely will not pass in current form, without some revision. Changes are occurring every day, even as this is written. The latest plan by the House GOP has announced only a short while ago. Some of the major changes announced are summarized below.
Some areas that seem more settled:
The latest proposals to the plan would simplify the tax brackets down to three or four, and keep the top tax rate of 39.6%, but at a higher income level. It would conserve the advantages of capital gains and qualified dividends. It would expand the standard deduction, as noted below. Corporate taxes would be slashed, though possibly not permanently. The Alternative Minimum Tax would be abolished.
The plan would double the standard deduction, thus drastically reducing the incentive to itemize. The GOP plan would also practically eliminate the itemized deductions, except for charitable and mortgage deductions, and it would place a lower cap on mortgage deductions and limit state and local tax deductions. But the picture changes daily. The repeal of the estate tax is one contentious provision.
In these uncertain times, the best source of information is often your Certified Public Accountant. It is quite likely that the final bill, when passed if it does pass, will look quite different from what we see today. While speculation has value, as financial interests hustle to forecast the most likely changes and predict their effects, producing reams of data and possible scenarios, none of these outcomes is certain at present.
Still, the professional financial firms and accountants who work in this area are hard at work attempting to predict which changes will occur and where they will leave potential clients on the tax playing field. Incomplete information is better than none, but as these potential changes loom closer, the picture will doubtless become clearer for the accounting and financial experts, and for everyone else, as well.