Congress Approves Sweeping Tax Reform

Author: Mark Ravera

On December 20, 2017, Congress approved sweeping tax reform. The President is expected to sign the bill next week in its current form.  The bill in its entirety is 588 pages.  Please feel free to call us anytime to discuss how this legislation may impact you or your business.  Below is a list of the major provisions which we feel are most impactful (most provisions will be effective January 1, 2018).

  • Revises personal income tax rates, with a revised top tax rate of 37%
  • Preserves preferential long-term capital gains rates at 15% and 20%
  • Provides for an additional 20% deduction for many pass-through businesses, including many in real estate
  • Bonus depreciation increased to 100% for eligible property placed in service between September 27, 2017 through January 1, 2023.
  • Enhanced Section 179 expensing of $1M, with an investment limitation of $2.5M
  • Corporate tax rate decreased to 21%
  • Changes to net operating loss rules for non-corporate taxpayers (no carryback allowed and can offset only 80% of taxable income)
  • Preserves the business interest deduction for real property businesses (those businesses with average annual gross receipts in excess of $25M can elect to use ADS depreciation to preserve the deduction)
  • Preserves 1031 exchanges for real property
  •  Preserves carried interest capital gains treatment on interests held over 3 years (increased from 1 year holding period)
  • Estate/gift tax lifetime exemptions doubled ($11M per individual, $22M for married couples)
  • There is no repeal of the estate tax
  • Corporate alternative minimum tax (AMT) has been repealed
  • For individuals, the alternative minimum tax (AMT) exemption and phase out limits have been increased
  • Principal residence mortgage interest deduction changes: interest allowable on $750K debt (decreased from $1M debt)
  • Personal state & local income tax/property tax deduction limitation of $10K