Tax Cuts and Jobs Act, H.R. 1

House leaders took a significant step forward with tax reform efforts on Thursday, November 2, with the release of the Tax Cuts and Jobs Act, H.R.1.  This legislation includes an expansive set of proposed changes to the corporate and individual tax systems.

The Capstan team will continue to monitor the progress of discussions and potential revisions.  At the current time, pertinent items include:

  • Immediate 100% expensing of qualified assets, between September 27, 2017 and January 1, 2023.
  • A significant increase in section 179 deduction value. This would now include qualified energy- efficient HVAC equipment purchases. This would be for 2017 through 2023.
  • Section 1031 like-kind exchanges are preserved for real estate.
  • Current tax treatment of carried interest is preserved.
  • Deductibility of interest on debt is maintained for those involved in real property trades or businesses, including commercial real estate development.
  • Current eight individual tax brackets are condensed into four brackets: 12 percent, 25 percent, 35 percent and 39.6 percent. The top rate of 39.6 percent would apply to income levels of more than $500,000 for an individual and $1 million for couples.
  • Corporate tax rates are reduced from the current 35 percent to 20 percent.
  • Pass-through businesses (such as partnerships and limited liability companies) will pay a new, lower top rate of 25 percent on their business income, subject to certain restrictions.
  • Alternative Minimum Tax (AMT) is eliminated.
  • The current estate tax threshold of $11.2 million for married couples is doubled, and phased out entirely by 2024. The step-up in cost basis on assets is retained.
  • Deduction for state and local taxes limited only to property tax and capped at $10,000. (Currently, state and local income and sales taxes can also be deducted.)
  • The Historic Preservation Tax Credit and New Markets Tax Credit are discontinued, with transition periods provided.

Starting next Monday, the House Ways & Means Committee will begin marking up the legislation. The President has expressed his desire to accelerate tax reform and sign a bill before the end of the year.

Capstan will provide updates as they develop.