The Republican tax bill, Tax Cuts and Jobs Act, will have an impact on your tax bill. Some items will be favorable and some not so much. Here’s an article from Forbes.com which discusses the proposed changes.
Three changes I find interesting:
One proposed item is the tax rates will change. Instead of seven tax brackets there will be four, 12%, 25%, 35% and 39.6%. For what it would mean if you are making $75,000 per year see this article by Business Insider.
Another item I find very interesting which will impact quite a few of my clients is the “two out of five” rule, excluding up to $250,000 ($500,000 for married filing jointly) in capital gains from the sale of your primary residence, would change to “five out of eight”. Which means you would have to live in your home for the last 5 out of eight years in order to claim the exemption. And, you can only use the exclusion once every five years. I foresee more taxpayers having to pay capital gains on the sale of their home if this bill passes.
A long awaited change regarding the nasty Alternative Minimum Tax (AMT), which has caught many unsuspecting taxpayers with a higher tax bill over the years, is finally here. (For an explanation of AMT check out Wikipedia.) The AMT would be ELIMINATED under the proposal! YES!!!
As always, we have to wait and see what happens. We don’t know if or when these changes will take place but it is always wise to do a little ‘what-if’ tax planning so you don’t get caught with your pants down! Contact your tax planning CPA or tax preparer. Don’t have one? We’d be glad to help Bakken CPA PC.