On December 20, 2017, President Trump signed the Tax Cuts and Job Act into law, which fulfills his promise to enact the legislation before Christmas. The passed tax reform bill is the most significant rewrite of the tax code since 1986 and the President’s first major legislative victory since taking office.
There were some last-minute legislative and technical hurdles along the way including the requiring the House to vote on the bill twice and passing of a waiver of automatic cuts of mandatory spending programs (PAYGO) for the tax measure in the short-term spending bill which Congress passed yesterday. The PAYGO provision would have also affected outstanding tax credit bonds that receive direct subsidy payments including build America bonds, qualified school construction bonds, and qualified energy conservation bonds, among others.
Highlights of the the legislation, which includes sweeping individual and corporate tax cuts, include (Effective date December 31, 2017):
- Maintains the tax-exempt status of governmental municipal bonds and private-activity bonds;
- Repeals municipal advance refundings;
- Seven individual tax brackets: 10%, 12%, 22%, 28%, 32%, 35% and 37%;
- Lowers the corporate rate to 21%;
- State and Local Tax Deduction: Individuals are allowed to deduct up to $10,000 in income, property and sales tax;
- Mortgage Interest Deduction: Cap lowered to $750,000 for new home purchases; and
- Repeals the individual mandate of the Affordable Care Act.
The Internal Revenue Services (IRS) plans to release its new withholding tables in January, so taxpayers can expect to see changes in their paychecks as soon as February.
