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41-18 CRESCENT ST, LONG ISLAND CITY, NY 11101
718-707-0295
47-46 VERNON BLVD, SECOND FLOOR, LONG ISLAND CITY, NY 11101
718-707-0955
Hernan Barona, E.A
Common Tax Reform Questions
BY JOHN SAVIGNANO, CPA
BELOW ARE SOME COMMONLY
ASKED QUESTIONS ON TAX REFORM:
Will Congress actually
pass tax legislation?
Yes. Failure isn’t an option for
Republicans in Congress who, after failing
to repeal Obamacare, face pressure
to deliver on their promise to cut taxes.
When will any tax
changes be enacted?
Sometime early next year is our
best guess. Congressional GOPers are
motivated to move quickly to appease
their donors and constituents and give
President Trump a legislative win. But
with only about 30 legislative days left
in the Senate calendar this year, enacting
tax changes before year-end will be difficult.
The House could vote on a tax package
by December, but the upper chamber
will probably need more time.
Will tax cuts apply for 2017?
It’s doubtful. The Treasury secretary
has hinted at retroactive changes, but we
don’t think that is feasible. The most likely
effective date for tax changes will be
January 1, 2018, with two caveats. The
proposal allowing firms to fully expense
purchases of depreciable assets…other
than buildings…for five years applies to
acquisitions made after September 27,
2017. Also, some of the pay-fors could be
put off to 2019 if enactment of the law is
delayed.
Will municipal bond interest
still be tax-exempt for
federal tax purposes?
Yes. A Senior White House administration
official has confirmed that lawmakers
will m=not make changes to
this popular break as part of tax reform.
This is good news not only for individuals
who own municipal bond investments
but also for states and cities that
rely on these bonds to fund infrastructure
projects.
What’s going to happen
to the tax rates for capital
gains and dividends?
The 15% maximum for most individuals
will stay the same. Ditto for the
3.8% net investment income surtax on
upper-incomers. It’s too soon to forecast
how the tax package will affect the
20% capital gains rate for upper-incomers
or the special 0% rate for filers now
in the 10% or 15% bracket. At this point,
it appears likely that both rates will be
retained by lawmakers.
How would altering inflation
indexing of various tax
breaks affect my taxes?
It’s a hidden tax hike that would nail
nearly all individual filers. Currently, the
federal income tax brackets, standard
deductions and many other tax items are
adjusted annually based on the government
calculated Consumer Price Index.
Economists have argued that the nowused
CPI tends to overstate actual inflation
because the formula doesn’t account
for how people change their spending
patterns as prices rise. They claim that a
“chained” index is a far better measure of
inflation. A chained CPI would result in
lower inflation adjustments than the current
index. As a result, there would be
smaller annual increases in tax brackets
and other breaks.
John Savignano is a partner with
Savignano Accountants & Advisors
located sat 47-46 Vernon Blvd.,
Second Floor, in Long Island City.
If you have any questions or require
additional information, please call
John at 718-707-0955.
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