As you have probably heard all over the news the Senate passed a new tax bill on Saturday morning. Most people are trying to dissect how this will personally effect their livelihood. However, this may be hard to tell until the details are finalized and tax season is upon us. Here are some of the major changes so that you can understand the new bill:
Corporate Tax Cut:
The corporate tax rate has been 35% in the United States which is pretty high compared to other countries. No matter what your political beliefs are both sides believe that a corporate tax cut is necessary. This new bill would bring the tax rate down to 20% and also let people bring money from overseas at a lower tax rate of 14.5%. Right now if you are doing business overseas you are taxed at a high rate to bring the money back into the country. Therefore, many companies just keep the money overseas. This will help the US economy by bringing in more income.
Tax Cuts for the Rich:
There will be slight tax cuts for the rich. The theory behind this is that giving the rich tax cuts will allow them to spend more money and contribute to the economy.
Tax Cuts for every American
With this new tax bill there will still be 7 classes. However, Americans will now benefit from tax cuts in each of these classes. As well, to be in the highest tax bracket you now have to be making a combined income of $1 million a year as compared to ~$497,000 that qualified you before.
However, another part of the tax plan is eliminating certain deductions that Americans can take now. This includes:
- some local and state exemptions
- the ability to deduct fire, storm, etc losses
- deductions for moving expenses
- deduction if you bike to work
There are more details to this tax plan but a lot of them differ from the tax plan in the House. Therefore, the two will have to come to an agreement on certain aspects of the tax bill.