The Recent Tax Reform in a Nutshell

Jan

H.R.1 – The Tax Cuts and Jobs Act is the largest tax reform in the last 30 years. It temporarily lowers personal tax rates and permanently lowers business tax rates from the current 35% to 25%, the lowest it’s been since 1939. This is probably the most controversial item in the tax reform, but it is largely what the reform is basing it’s growth projections on.

According to the Tax Foundation’s Taxes and Growth model, H.R.1 would increase the size of the US economy by 1.7%, with 1.5% higher wages. Their projections also claim an additional 339,000 full-time jobs will be added to the US employment market.

Source: Tax Foundation Taxes and Growth Model, November 2017

Their model is based largely on the significantly lower cost of capital under the proposal, the reduction of the corporate income tax rate and accelerated expensing of capital investment for short-lived assets, assets only expected to be in use for 8 years or less. The most common type of asset is computer equipment but can include certain types of machinery and tools with a short usage span.

Business tax rates are lowered permanently, but in 2025 the personal tax rates will reset to the former 2017 rates if there are no extensions to H.R.1.

Perhaps most importantly, the tax reform doubles the personal tax reduction, from 6,300-13,000 to 12,600-24,000.

Check the charts below to see your personal tax reduction rate:

Single taxpayers

Taxable income over	But not over	Old Rate	New Rate
$0	$9,525	10%	10%
$9,525	$38,700	15%	12%
$38,700	$82,500	25%	22%
$82,500	$157,500	28%	24%
$157,500	$200,000	33%	32%
$200,000	$500,000	35%	35%
$500,000	+	39.6%	37%

Married taxpayers filing joint returns

Taxable income over	But not over	Old Rate	New Rate
$0	$19,050	10%	10%
$19,050	$77,400	15%	12%
$77,400	$165,000	25%	22%
$165,000	$315,000	28%	24%
$315,000	$400,000	33%	32%
$400,000	$600,000	35%	35%
$600,000	+	39.6%	37%