The 2017 Tax Cuts and Jobs Act changes a lot about the US tax code.
The Tax Cuts and Jobs Act bill represents the largest overhaul to the tax code of the United States in more than three decades, overhauling the taxes businesses and individuals are expected to pay while at the same time jump-starting the American economy once again with higher wages, improved opportunity, and the promise of a much more dynamic economy in the US.
Representing the single largest piece of legislation pushed through by the Trump administration, the US bill was signed into law in December of 2017 – but professional accountants, CPAs, and financial experts are sure to have this be a big part of their Continuing Professional Education going forward.
Our CPE resources are designed to get you up to speed regarding this legislation as quickly as possible, and this cheat sheet will shine a light on some of the topics our courses cover.
Highlighting the major takeaways of the 2017 Tax Cuts and Jobs Act
There are few that would argue that the US tax code is not in need of significant reform and overhaul, which is why the 2017 Tax Cuts and Jobs Act is being met with so much excitement. As highlighted above, the changes made within this law are some of the most drastic made to the US tax code in more than 30 years.
Working to dramatically simplify the tax code, not only for US citizens but also businesses and organizations operating within this nation, the bill makes a number of large sweeping changes but none of them may be quite as impactful as the following four:
- Corporate and individual tax rates are slashed dramatically
- The standard deduction so many take advantage of each year has been doubled
- Child tax credits have been expanded considerably under the 2017 Tax Cuts and Jobs Act
- The individual health care mandate that was a major part of the ACA has been removed
Recognizing that the individual taxpayer in the United States has been squeezed significantly over the last 30 or 40 years, and also wanting to re-stimulate the US economy, expand the job base, and provide more economic opportunity to those that have for so long gone without hope, the 2017 Tax Cuts and Jobs Act bill has incredible potential.
Proponents of this bill have shown great confidence in its ability to drive wages in most career fields higher than ever before, generate new job growth and economic opportunity, and produce a more dynamic economy designed to meet the needs of today’s modern global business community.
Sure, a big part of the economic growth this bill hopes to generate is dependent upon slashing the taxes of some of the largest corporations in the country. Some folks aren’t all that excited about the rich getting even more breaks (especially in the light of scandals like the Panama Papers showing just how much money these corporations are hiding offshore to avoid taxes in the first place), but the tax reductions aren’t just for ultra wealthy corporations.
The 2017 Tax Cuts and Jobs Act is really built on the back of dramatically reducing the tax burden on the American working class and the vanishing middle-class. Improved standard deductions, the removal of the Obamacare individual mandate, and the expansion of college savings accounts, health savings accounts, and a host of other tax credits and secondary deductions are designed to put more cash in the pockets of those that need it most.
This is where a significant portion of professional CPA Continuing Professional Education is going to revolve around. For a list of our Tax Cuts and Jobs Act online CPE courses please click.
Everyone (EVERYONE) recognizes that the US tax code is broken, that adding more convoluted tax reforms isn’t the answer, and that a simplified and streamlined solution is the only way to move forward. Internal Revenue Service (IRS) resources for the tax law changes can be found at https://www.irs.gov/newsroom/resources-for-tax-law-changes
Major areas of focus for our CPE regarding the 2017 Tax Cuts and Jobs Act
Sweeping changes to business tax codes in the US
The most significant portion of the 2017 Tax Cuts and Jobs Act bill focuses on rewriting the business tax codes in the United States, dragging the US tax code into the 21st Century.
These changes are substantial and sweeping, which is why so much of our Continuing Professional Education coursework focuses on the business tax code alterations of the 2017 Tax Cuts and Jobs Act.
Understanding that the US economy is impacted significantly by the global economy (and vice versa), the proposals in the 2017 Tax Cuts and Jobs Act are designed to boost the US economy by anywhere between 2.6% in 2.8% within the next 10 years. Some financial experts are forecasting a growth rate of between $4000 and $4400 per household to the GDP because of the changes made in this bill.
A flat 21% corporate tax rate starting in 2018
Though the US is a major driver of business, commerce, and innovation around the world (with most of the world’s most valuable companies residing within our borders) US companies have had to pay some of the most punitive tax rates along the way.
Before the 2017 Tax Cuts and Jobs Act was signed into law the federal tax rate for corporations was set at 35%, but with the changes made as part of this package of laws the corporate tax rate in the US would drop to 21% on a permanent basis.
This tax rate remains one of the highest in the world. It is certainly higher than the corporate tax rates of nearly all of the major nations around the world that the United States competes directly with. At the same time it encourages a significant flood of new investment into the United States. The prospects for this change to trigger higher wages, more jobs, and create a more robust and diverse economy are positive.
Temporary expensing changes are a big part of the 2017 Tax Cuts and Jobs Act
A significant amount of the CPE that CPAs and financial advisors are going to have to take advantage of moving forward will inevitably revolve around the temporary expensing changes that have been made as part of the 2017 Tax Cuts and Jobs Act.
Small businesses are going to see some huge changes. Section 179 of the 2017 Tax Cuts and Jobs Act raises the cap on investments that can be expensed from $500,000 to $1 million, with a hard cap being placed on equipment purchases that can be expensed going up to $2.5 million.
These expensing changes, however, are temporary and currently will only be in effect for the next five years. After 2022, businesses may no longer be able to write off the expenses for their research and development investments. Most agree that’s a step backwards and something that Congress will need to address in the years to come.
A 20% “pass-through” deduction is now in action
A significant amount of small businesses in the United States act as “pass-through” businesses that pay their taxes under the individual tax rates. As such, these businesses will now be able to take advantage of a brand-new deduction, allowing them to deduct 20% of non-salary business income.
There is some concern about the changes that this 20% pass-through deduction brings to the table, however. The policy rationale and somewhat arbitrary favoring of different industries over another will bring some complexity and tough to answer questions to your doorstep as a financial professional, which is just another reason why your Continuing Professional Education regarding the 2017 Tax Cuts and Jobs Act is so essential.
You’ll want to remain has up-to-date about these changes as possible so as to best serve your clients moving forward.
Other major changes that your CPE must revolve around
The 2017 Tax Cuts and Jobs Act is a pretty robust bill considering the fact that it’s initiative is to simplify and streamline things. It’s important to think of this bill as the tool used to cut out a lot of the fat, waste, noise, and clutter in the US tax code – and most agree there’s plenty of that to be removed!
The Territoriality and Repatriation aspects of the 2017 Tax Cuts and Jobs Act throws out the worldwide international tax system for one much more territorial in nature, allowing for a considerable amount of cash held in offshore accounts to avoid taxes to be brought back into the United States without the punitive measures that would have been taken in the past.
The 2017 Tax Cuts and Jobs Act now allows for a one time tax of 15.5% on liquid assets brought back into the US and 8% tax on physical assets, which could prove to be a major boost to the US economy if companies like Apple, Google, and Amazon choose to bring their billions of offshore capital back into the United States.
The Limited Interest Deduction is now set at 30% of all earnings before interest and taxes for C classification corporations, and a whole host of special interest subsidies remain.
The 2017 Tax Cuts and Jobs Act changes a lot
At the end of the day, most financial professionals in the United States that doesn’t believe that the US tax code is desperately in need of significant overhaul and reform.
The 2017 Tax Cuts and Jobs Act attempts to take a pro-growth approach to overhauling the tax code, helping businesses and individual citizens keep more of the money they have earned, all while making it easier and more attractive for businesses to stay in the United States rather than move offshore.
More changes are necessary – and incoming, if reports are to be believed – and you’ll want to make sure that your Continuing Professional Education as a financial expert is up to date, current, and as informed as possible.
The 2017 Tax Cuts and Jobs Act CPE resources we share are designed to make sure that you not only meet the professional requirements of your field, but also allow you to provide the best advice to those that trust you with their financial future.
Individual Tax Cuts and Jobs Act CPE courses on our site can be found at the links below: