Highlights of the US Tax Cuts and Jobs Act, 2017
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The Gravitas Review of Business & Property Law, Vol.9 No.1 (March 2018)
Joseph Munis
Joseph Munis, former Partner and Head of Tax & Business Advisory Services, Arthur Andersen, Nigeria, and former Executive Chairman of the ICAN-USA District Society, provides informed “Highlights of the US Tax Cuts and Jobs Act, 2017”. The Act signed into law by President Donald Trump in December 2017 is the most significant tax changes in the United States in more than 30 years. Munis highlights the business, individual and international tax provisions of the Act.
Product Description
The Gravitas Review of Business & Property Law, Vol.9 No.1 (March 2018)
Pages: 4
Highlights of the US Tax Cuts and Jobs Act, 2017
Joseph Munis*
INTRODUCTION
President Donald Trump recently signed the Tax Cuts and Jobs Bill into law.1 The law makes major changes to the U.S. tax code for both individuals and corporations. The Act represents the most significant tax changes in the United States in more than 30 years.
This summary addresses the significant business, international and individual tax provisions contained in the new tax law. These changes will primarily be effective starting in 2018, but there are a few exceptions. The law simplifies a few areas by eliminating many tax provisions while it makes some other areas more complicated. All provisions are effective for tax years beginning after Dec. 31, 2017, unless otherwise noted.
BUSINESS PROVISIONS
The provisions of the Act relating to businesses are highlighted below:
a. Corporate tax rate – Reduced from a top rate of 35 percent to 21 percent.
b. Corporate alternative minimum tax (AMT) – Corporate AMT is repealed.
c. Pass-through businesses – Pass-through businesses (entities and sole proprietors) are allowed a deduction equal to excluding 20 percent of the business income. For owners otherwise subject to the top 37 percent individual tax rate, the effective tax rate on qualified income will be reduced to 29.6 percent.
i. Pass-through owners whose taxable income exceeds $315,000 for a joint return (or lower amounts for single filers) are subject to restrictions on the deduction in situations where the business did not have a specified level of wage payments or a specified amount of tangible, depreciable assets used in the business. In addition, restrictions on the deduction apply to certain service businesses and other businesses specified in the new law.
ii. Trusts and estates are eligible for the 20 percent deduction.
iii. A new restriction limits an owner’s ability to deduct active business losses against non-business income.
d. Carried interests – The Act creates a new three-year holding period that must be satisfied to enjoy long-term capital gains rates with respect to certain carried interests in certain investment or real estate funds.
* BSc., FCA, CPA. Joseph was the first Nigerian International Partner and Head of Tax & Business Advisory Services in Arthur Andersen, Nigeria. He was also the first Executive Chairman of the ICAN-USA District Society. He currently lives in the USA.
- The Bill was signed into law by President Donald Trump on 22 December 2017.
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