The External Revenue Service, under the administration of President Donald Trump, has implemented various tax savings solutions aimed at benefiting individuals and businesses alike. The Tax Cuts and Jobs Act (TCJA), signed into law in December 2017, is a comprehensive overhaul of the US tax code, providing numerous opportunities for tax savings. In this article, we will delve into the specifics of these solutions, exploring how they can be leveraged to minimize tax liabilities and maximize financial growth.
Tax Cuts and Jobs Act: Key Provisions
The TCJA introduced significant changes to the tax code, including the reduction of corporate tax rates, the doubling of the standard deduction, and the limitation of state and local tax (SALT) deductions. Corporate tax rates were reduced from 35% to 21%, making the US more competitive in the global market. The standard deduction was doubled to 12,000 for single filers and 24,000 for joint filers, simplifying the tax filing process for many individuals. However, the SALT deduction was limited to $10,000, affecting taxpayers in high-tax states.
Individual Tax Savings Solutions
Several provisions within the TCJA offer individual tax savings solutions. The child tax credit was increased from 1,000 to 2,000 per child, with up to $1,400 being refundable. This change benefits families with dependent children, providing a significant reduction in tax liability. Additionally, the medical expense deduction threshold was reduced from 10% to 7.5% of adjusted gross income (AGI), allowing more individuals to claim medical expenses on their tax return.
| Tax Credit/Deduction | Pre-TCJA | Post-TCJA |
|---|---|---|
| Child Tax Credit | $1,000 | $2,000 |
| Medical Expense Deduction Threshold | 10% of AGI | 7.5% of AGI |
Business Tax Savings Solutions
The TCJA also introduced several business tax savings solutions, including the 20% qualified business income (QBI) deduction and the increased section 179 deduction. The QBI deduction allows pass-through entities, such as sole proprietorships and partnerships, to deduct up to 20% of qualified business income, reducing their taxable income. The section 179 deduction was increased to $1 million, allowing businesses to deduct the full cost of qualifying equipment and software in the year of purchase.
International Tax Savings Solutions
The TCJA introduced a new territorial tax system, which exempts foreign earnings from US taxation. This change aims to encourage US-based multinational corporations to repatriate foreign earnings, investing them in the US economy. Additionally, the global intangible low-taxed income (GILTI) provision was introduced, which taxes foreign earnings above a certain threshold, ensuring that US corporations pay a minimum level of tax on their foreign income.
In conclusion, the External Revenue Service, under the Trump administration, has implemented various tax savings solutions through the Tax Cuts and Jobs Act. These solutions offer significant opportunities for individuals and businesses to minimize their tax liabilities and maximize their financial growth. It is crucial for taxpayers to consult with a tax professional to ensure they are taking advantage of all available tax savings solutions.
What is the Tax Cuts and Jobs Act (TCJA)?
+The Tax Cuts and Jobs Act (TCJA) is a comprehensive overhaul of the US tax code, signed into law in December 2017. It introduced significant changes to the tax code, including the reduction of corporate tax rates, the doubling of the standard deduction, and the limitation of state and local tax (SALT) deductions.
What is the 20% qualified business income (QBI) deduction?
+The 20% qualified business income (QBI) deduction is a tax deduction that allows pass-through entities, such as sole proprietorships and partnerships, to deduct up to 20% of qualified business income, reducing their taxable income.
How does the global intangible low-taxed income (GILTI) provision work?
+The global intangible low-taxed income (GILTI) provision taxes foreign earnings above a certain threshold, ensuring that US corporations pay a minimum level of tax on their foreign income. This provision aims to prevent US corporations from shifting profits to low-tax jurisdictions.
