White House

Congress has passed the largest tax overhaul in 30 years, according to an article on the CNN website. The House of Representatives passed the bill on the afternoon of Dec. 19 and the Senate voted along party lines to pass the final version of the tax bill early the next morning. Because the Senate ruled that two provisions in the bill did not comply with budget rules, it went back to the House for a second time later that day.

The bill will be enrolled and will head to the president's desk to be signed into law. This process usually takes a couple days, so it's not certain exactly when the president will sign the bill.

The new plan overhauls the tax code and cuts corporate tax rates. Democrats and critics predict that the plan will primarily benefit the wealthy and corporations. It includes a permanent cut to the corporate tax rate, dropping it from 35 percent to 21 percent. Pass-through businesses also would receive significant cuts.

Starting next year, individuals can generally deduct 20 percent of their qualified business income from a partnership, S corporation and sole proprietorship. A phase-out for the deduction begins at $157,500 of individual income and $315,000 of income for couples filing jointly.

Currently, small business owners generally pay income taxes based on the normal rate for individual taxes. Often, they are involved in or run partnerships, sole proprietorships, limited liability companies and S corporations.

Ninety percent of American businesses are organized as pass-through companies, such as LLCs, S-Corps, partnerships. These companies “pass through” the business income to the owner's individual tax rate.

The plan would also cut individual tax rates for all levels. The largest cuts would go to the wealthy, but, in 2018, nearly all Americans will see their income tax decrease, according to a nonpartisan analysis of the final plan.

Families earning less than $25,000 would receive an average tax cut of $60, while those earning more $733,000 would see an average cut of $51,000, according to the nonpartisan Tax Policy Center.

The bill will increase the debt by $448 billion over the next 10 years when scored on a dynamic basis (accounting for growth provisions in the bill), according to the Tax Foundation. The Tax Foundation is considered more aggressive with its assumptions for economic growth than other entities.

Read the full article here.