Find Your Specialist


Contact Us

    Go Back

    Biggest Tax Changes in 30 Years Passed by Congress

    Last night the Senate signed a slightly modified version of the Tax Cuts and Jobs Act, a key hurdle in passing the tax legislation. While the House needs to vote again today, the bill is expected to be signed into law later this week, creating the biggest overhaul of U.S. tax code since the 1980s. 

    Highlights of the changes 

    While the legislation includes hundreds of changes, here are some of the highlights.  

    Perhaps the biggest change is the reduction of the corporate tax rate form 35 percent to 21 percent. This change to the corporate tax rate is permanent, and brings the U.S. closer to the rates found in other industrialize countries, which average 22.5 percent. For corporations the alternative minimum tax (AMT) would be repealed. Corporations could continue to use their AMT credits to offset their regular tax liability; credits would be partially refundable in tax years 2018 through 2021. 

    The corporate net interest expense deduction also has changes. This deduction would be limited to 30 percent of a business’s adjusted taxable income. In 2018 through 2021, adjusted taxable income would be based on EBITDA; after 2021 the calculation would be based on EBIT. Interest amounts greater than 30 percent could be carried forward into future tax years. 

    For individuals, tax rates for most of the seven tax brackets have been lowered, ranging from 10 percent to 37 percent, and the Affordable Care Act individual health insurance mandate has been eliminated. The standard deduction has been nearly doubled. The estate tax exemption has been doubled and fewer taxpayers will be subject to the alternative minimum tax (AMT). 

    In an effort to balance the impact on the deficit of lower tax rates, some tax credits have been modified or suspended. Those include a cap for the amount of mortgage interest, state taxes and local taxes that can be deducted on your federal tax return. The state and local tax deduction caps may present a time-sensitive tax planning issue for individuals with substantial state taxes owed. Pre-paying those state taxes during calendar 2017 could result in a substantial tax savings down the road.

    Most of the changes for individual taxpayers are temporary, and will expire in 2025 unless more legislation is passed to extend the changes.  

    According to the Congressional Joint Committee on Taxation, the changes would reduce federal revenue by almost $1.5 trillion over the coming decade. This estimate is before accounting for any economic growth that might result. 

    What happens next? 

    After the House votes on the exact version the Senate passed last night the bill will go to the president to be signed into law. The work of understanding the implications of the changes will begin in earnest. With myriad changes added to the bill during the last week before the vote, sorting through the hundreds of pages of the bill will take time. 

    Stay tuned for more detailed analysis from Frazier & Deeter of the implications of the new tax code.


    Related Articles

    • 01.25.2023

      A New Year Means New Privacy Laws

      Ever since the General Data Protection Regulation (GDPR) came into effect in May 2018, US state privacy laws have been passed in Virginia, Colorado, Connecticut, Utah and, most pressing of them all, California. The California Privacy Rights Act (CPRA) went…

      Continue Reading
    • 01.19.2023

      The New Rules Under Section 174

      Internal Revenue Code Section 174 has long been used by taxpayers to deduct certain expenses related to research and experimentation (R&E) in the current year.  The code section was originally enacted in 1954 to eliminate uncertainty in the tax accounting…

      Continue Reading
    • 12.20.2022

      IRS Customer Service May Improve in 2023

      With 4,000 new customer service representatives and plans to hire 700 new Taxpayer Assistance Center (TAC) employees, taxpayers soon may get relief from endless hold times, no in-person help and unresolved problems.

      Continue Reading
    • 12.12.2022

      Reduce Taxable Income with IRA Distributions Transfers

      IRA owners who are age 70½ or over can transfer up to $100,000 per year to charity to reduce their taxable income. These transfers, known as qualified charitable distributions or QCDs, offer end-of-the year tax savings and can count toward required minimum distributions (RMDs) that taxpayers who are age 72 must make each year. Think of it as a tax-free charitable rollover of IRA funds.

      Continue Reading
    • 12.02.2022

      UK R&D Tax Reliefs – Where Are We Now?

      In the November 2022 Autumn Statement, the Chancellor announced significant changes to the current Research and Development (R&D) tax reliefs. The key announcements were a change to the applicable rate of the Research and Development Expenditure Credit (RDEC) and a…

      Continue Reading
    • 12.01.2022

      1099s Required for 2022 Tax Year

      Taxpayers earning income from selling goods or providing services may receive a Form 1099-K, Payment Card and Third-Party Network Transactions, for the first time in early 2023, when the 2022 forms are due. The requirement to file Forms 1099 have…

      Continue Reading
    • 11.28.2022

      IRS Uncovers $3.1 Billion in COVID Fraud

      The IRS Criminal Investigation department (IRS-CI) has partnered with the Justice Department to uncover and prosecute fraudulent activities related to the federal government’s COVID relief programs. To date, the IRS has conducted 840 investigations involving fraud amounts totaling more than…

      Continue Reading
    • 10.25.2022

      IRS Inflation Reduction Act Increases Funds

      The Inflation Reduction Act of 2022, enacted in August, increased funding for the IRS by $80 billion through 2031 for enforcement activities, operations support, systems modernization and taxpayer services. The legislative language, Treasury Secretary Janet Yellen and IRS Commissioner Charles…

      Continue Reading

    Privacy Overview

    When you use or access the Site, we use cookies, device identifiers, and similar technologies such as pixels, web beacons, and local storage to collect information about how you use the Site. We process the information collected through such technologies, which may include Personal Information, to help operate certain features of the Site (e.g., to prevent online poll participants from voting more than once), to enhance your experience through personalization, and to help us better understand the features of the Site that you and other users are most interested in.

    You can enable or disable our use of cookies per category.
    Always Enabled