Tax reform highlights for individuals

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December 2017


On December 20, 2017, Congress gave final approval to the House and Senate conference committee agreement on significant tax reform legislation.

The House passed the bill by a vote of 224 to 201, with 12 Republicans voting no along with House Democrats. The Senate passed the bill by a party-line vote of 51 to 48, with Senator John McCain (R-AZ) missing the vote due to illness. The timing of President Trump’s signature is unclear as restrictions related to the Pay-As-You-Go (PAYGO) Act of 2010 could require mandatory cuts to Medicare and other spending items because of the projected increase to the deficit from the bill. Congress may waive the restrictions related to PAYGO as part of a temporary funding bill to avoid a government shutdown later this week. If a waiver is not obtained and the bill is signed in 2017, those cuts would be required in January 2018. Delaying the signing to 2018 would delay those cuts until 2019 and give Congress additional time to negotiate a possible waiver of the cuts.

The final conference committee agreement (Conference Agreement) would lower permanently the US federal corporate income tax rate from 35% to 21%. The Conference Agreement also would temporarily reduce the current 39.6-% top individual income tax rate to 37% and revise other individual income tax rates and brackets. Most changes under the Conference Agreement would be effective for tax years beginning after December 31, 2017.

For a detailed discussion of the broader impact of overview of the Conference Agreement, please see PwC’s Tax Insight, Congress gives final approval to tax reform conference committee agreement.

The takeaway

There are a number of provisions in the tax reform legislation that will affect high net worth individuals, owners of closely-held businesses and hedge fund and private equity investors. It is expected that many of the provisions will require guidance in order to determine how to implement the new laws.

As the new law generally will take effect almost immediately (January 1, 2018), taxpayers should not delay in determining how the new tax provisions will affect them. This should include planning what should be done to take advantage of the favorable provisions and how to minimize the negative effect of the unfavorable ones.

Contact us

Brittney Saks

Partner, PwC US

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