2017 Mid Year Tax Review

by Mark Xu CPA

XU CPA LLC

Greenville, SC

www.mygreenvillecpa.com

 

June 20, 2017

 

Overview

According to industry pundits, as of right now, the odds for the proposed tax reform appear to be much more positive than it had ever been before. What we have right now are some expiring provisions, some “permanently” extended tax provisions and a proposed reform to the whole tax landscape.

 

Expiring provisions

  Many tax provisions are now expired as this blog article is written. To name a few that are commonly used and known:

  • Exclusion of discharge of qualified principal residence indebtedness from income;
  • Mortgage insurance premium as mortgage interest;
  • Qualified tuition deduction;
  • 10% nonbusiness energy property; energy efficient homes credits.

 

Permanent or semi permanent provisions

  Many other tax provisions are set to stay “permanently”, many of which are beneficial and commonly used by taxpayers just to list a few:

  • Enhanced child tax credit (refundable);
  • American Opportunity tax credit;
  • Enhanced earned income tax credit (low income family);
  • School teacher deduction($250);
  • Employer provided mass transit exclusion;
  • State and local sales tax deduction;
  • Exclusion of charity giving from IRA;
  • $500,000 of Section 179 expansion;
  • 15 years treatment of qualified leasehold improvement, retail property and restaurant property;
  • 100% qualified small business stock exclusion, elimination of AMT treatment;
  • Bonus depreciation here to stay but phase out in 2019;

 

Tax Reform

  The exact extend of the tax reform proposal is still not very clear, but since last November the following items are being proposed:

  •   Uncertain of capital gain tax rate;
  • Repeal net investment tax;
  • Increase standard deduction $15,000 for single and double for MFJ;
  • Itemized deduction capped at $100,000 for single;
  •  Repeal AMT;
  •  Eliminate personal exemption; (larger family)
  •  Eliminate HOH;
  •  Child care expense deduction;
  •  Rebate of child care to low income via EIC
  •  Heath saving like dependent care saving account;
  •  Repeal estate tax, with capital gain over $10 million;
  •  Cut corporate rate from35% to 15%;
  •  Proposed pass-through income cut;
  • Reduction of existing tax brackets to only 3, 12%, 25% and 33%

 

Summary

  The proposal is clearly designed to offer some cross the board cut, eliminate loopholes and corporate tax reform. The richest 1% of taxpayers will see more than 50% of the benefits while the lower income taxpayers and working families will see help with child care deduction and credit.

 

 

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