Changes & Implication -Tax Cuts and Jobs Act in US
US Tax Code recently underwent the largest change in its history as Senate passed its plan in a 51-49 vote. It was the biggest obstacle to pass in the Senate. It will transform US health care sector, higher education, philanthropy, and, of course, the federal tax code.
While the arrangement is as yet subject to modification but passage appears closer than ever for “Tax Cuts and Jobs Act”.
Under the Tax Cuts and Jobs Act, the corporate income tax rate would be lowered to 20% from 35%. The exemption from tax would be provided to the future foreign profits of US-based firms.
Big businesses will have an opportunity to bring back any money they have stored overseas at a very low tax rate of 14.5%.
Tax system in relation to businesses has been changed from worldwide system to a territorial system which means now businesses will be taxed on their earnings in the United States and not from all over the world.
Seven tax brackets will be there. This can result most Americans enjoying tax cut in the coming years.
The bill also eliminates various deductions namely – deduction for tax preparation expenses, deduction for people who bike to work, deduction for moving expenses. It also eliminates the ability to deduct losses from “fire, storm, shipwreck, or other casualty, or from theft.”
Alternative minimum tax for high-earning individuals would be trimmed.
The main reason behind lowering corporate income tax rate from 35% to 20% is because 35% is too high and not competitive with the rest of the world. Sweeping changes are expected in health care.
Also, the bill opens up more land to oil drilling in Alaska as it legalizes drilling by oil and gas companies in a part of Alaska’s ANWR area that’s along the coast.