Written by: Madeline Brinker, CPA
The Tax Cuts and Jobs Act (TCJA), passed last December, includes various tax cuts to consider during 2018 tax planning. But are more changes to come?
Our federal government is working on putting together a second tax bill, to complement the TCJA, which is expected to be introduced in October- perhaps sooner. Below are provisions that may appear in this second Republican tax bill – referred to as “Phase II” or “Tax Bill 2.0”.
- Reduction in the corporate tax rate from 21% to 20%
- Individual tax cuts enacted as part of the TCJA made permanent or extended (current provisions are set to expire at the end of 2025)
- Retirement savings planning provisions
- Education provisions, including consolidation of college and vocational school education incentives
- Potential for lower individual income tax rates
- Increased standard deduction
- Expanded child tax credit
If the second tax bill gains approval in the House of Representatives, it will need 60 votes to pass in the Senate.
Missouri may also have tax law changes in store for its residents.
In January, Governor Greitens announced his plan to cut Missouri taxes for corporations and individuals. In May, the House passed and presented an individual income tax bill to the Governor. House Bill 2540 includes the following provisions:
- Reduction of the top individual income tax rate from 5.9% to 5.5% (scheduled to gradually drop to 5.1% over the course of several years if revenue targets are met)
- Decrease in the maximum business pass-through income deduction from 25% to 20%
- Disallowance of Missouri personal and dependency exemptions if the federal exemption amount is zero
- Phase out of the federal income tax deduction for individuals based on adjusted gross income limits (The current $5,000 single and $10,000 MFJ deductions reduced to 0-35% of these amounts)
Greitens’ January announcement included mention of an earned income tax credit for low-income workers. Provision for a credit of this nature did not appear in HB 2450.
In June, the Governor signed Senate Bill 884, enacting a decrease in the corporate tax rate from 6.25% to 4%. The bill also disallows the three-factor apportionment method available to corporations with multi-state income. Both provisions go into effect for tax years beginning on or after January 1, 2020.
If you have any questions about the information above, please contact your tax adviser. We’ll do our best to provide you with updates as the tax laws progress.