Opinion: The new tax bill – are you on board?

Justin B. Cantwell

In 2017, the Tax Cuts and Jobs Act significantly changed the Internal Revenue Code for both individuals and businesses. On Dec. 31, many individual tax provisions of the TCJA are set to expire. However, this month, Congress released proposed tax legislation to extend certain provisions of the TCJA. This article intends to highlight some of the primary changes to look out for in this proposed bill.

The standard deduction would be increased to $32,000 from $30,000 for joint returns, $24,000 from $22,500 for heads of households, and $16,000 from $15,000 for individual filers, which would likely result in a tax cut for most taxpayers through Jan. 1, 2029, according to reporting in Bloomberg Tax.

Individuals 65 years old and above would enjoy an extra deduction of $4,000 per filer, per a report from CBS News. However, this deduction would be available only to people with a modified adjusted gross income of $75,000 or less for single filers and $150,000 or less for jointly filed couples. This tax break would extend through 2028.

Flow-through entities (i.e., sole proprietorships, partnerships, limited liability companies and S corporations) would be allowed to deduct more qualified business income under IRC section 199A, increasing the QBI to 23% from 20%.

The Child Tax Credit would be increased to $2,500 from $2,000 per child through 2028 but would require married couples to file a joint tax return to receive the credit, according to Bloomberg. This proposal would also require both the child and the parents to have a valid Social Security number before the credit becomes available.

The estate and gift tax exemption would see a permanent increase in the amount of assets exempt from this 40% tax to $15 million for individuals and $30 million for couples by 2026, with the exemption indexed to inflation in the future, according to a CBS report. Without such change, the threshold would dip back down to about $7 million for individuals and $14 million for married couples starting Jan. 1, 2026, subjecting many high-net worth individuals to greater taxation on the assets they leave behind at death.

Other proposed changes, according to coverage in The New York Times, include cutting $330 billion in spending on student loans, slashing food stamps by scaling back the Supplemental Nutrition Assistance Program that provides food stamps to roughly 42 million low-income individuals and scaling back Medicaid for the poor and disabled.

Furthermore, a controversial rule would be abolished that requires Form 1099-K reporting on payment platforms (e.g., PayPal, Venmo) for individuals who have received more than $600, per reporting by CBS. Moreover, taxes on tipped income and overtime pay would be eliminated over the next three years. Also, the proposal would remove taxes on the interest of car loans by permitting consumers to deduct up to $10,000 for the interest paid on automobile loans, which would last only three years.

Lastly, the proposal would seek to boost national security by devoting an additional $150 billion in military spending on the so-called Golden Dome, with shipbuilding efforts and a new space-based missile defense, according to The New York Times. It would also boost immigration enforcement by spending around $175 billion on barriers at the U.S. southern border, in addition to Border Patrol agents and facilities.

It’s important to note it will take weeks before a bill lands on the president’s desk for consideration, and many of these provisions will be debated and potentially amended before the bill reaches that point.

House Speaker Mike Johnson has stated that he intends to send the bill to the Senate by Memorial Day. This means that individuals and businesses will be left with an expiring tax code and an uncertain outlook on the economy as Congress irons out wrinkles in the proposed bill.

Whatever changes are made to the final tax bill, change is imminent. Be sure to stay up to date on the constantly changing tax environment and consult with your legal and tax professionals to ensure you and your business are prepared for the future.

Justin B. Cantwell is an associate at Carnahan Evans PC. He can be reached at
jcantwell@carnahanevans.com.