I understand. You cannot turn on the tv or radio, pick up the newspaper, or have a conversation with your Uncle Harold without the topic of the “new tax laws” coming up. Right now, it is difficult to separate the facts from fiction – and just when you think you figure out the facts, something is said that makes you question whether you truly understand or not. So, let me explain “where” we are at on the proposed tax law changes and “what” those proposed changes are …
First, let us begin with the “where” are we – Back in April, Susan Hunter wrote an excellent blog about changes to the tax law. In that blog, she referenced a classic School House Rock song, “I’m Just a Bill.” (https://www.youtube.com/watch?v=FFroMQlKiag) I highly recommend checking it out. First, you certainly cannot go wrong with a little School House Rock, but it may make the rest of this blog slightly easier to follow if you have a refresher course.
The House of Representatives passed the Bill on November 16th while the Senate just recently passed it on December 2nd. However, the Senate’s Bill is different than the one the House passed. So, what happens now? They will have to collaborate and work out a final version, which will be done through what is called a conference committee. Thereafter, each chamber will vote again and if passed, the Bill will be on its way for President Trump to sign. The “take home” point here is similar to that of Susan’s point in her blog in April. While it is still not officially the “law” quite yet, we are certainly farther along than we were back in April – and could see the Bill become law by the end of the year, but the end of the year is not too far away.
Second, let us take a look at “what” those proposed changes are – Since the House Bill and Senate Bill were not the same, there are pieces left to be finalized. The Associated Press released a helpful breakdown of the differences: https://apnews.com/379350d0c81a4d93a629c7146afe7932/Highlights-of-Senate,-House-GOP-bills-to-overhaul-tax-code. From the estate planning perspective, it is important to note the proposed changes concerning estate and gift taxes. Under the House Bill and Senate Bill, the federal gift and estate exemption would be doubled – therefore, instead of the current $5.49 million dollar exemption, an individual would get approximately an $11 million dollar exemption. Yes, you read that right – an individual would have to have a collective estate value or lifetime gift value that exceeded $11 million dollars before such was taxed.
Although the Bill has not been finalized, its road to the President’s desk is a shorter journey than it was even just a couple of months ago. The changes are very likely coming. Though, “what” the changes are is still being decided. The link above to the Associated Press breakdown showcases that the changes encompass far more than just revisions to estate and gift tax. They are also proposing modifications to personal income tax rates, tax credits, corporate taxes, mortgage deductions, and more. It is important to note how these changes will impact you personally and, perhaps, professionally. From our specific point of view, the proposed changes to the estate and gift tax exemptions will impact few people – though, if there is concern, we can certainly accommodate and create a plan that will be advantageous for you and your family.
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