US Tax Reform Bill
Late in 2017 Congress passed a major tax reform bill the Tax Cuts and Jobs Act. This introduced numerous changes. For the most part most these are not likely to have a major effect on Americans resident outside the US. The main exceptions being those who either control or, in some cases, own 10% or more of a foreign corporation. Some of the most notable are covered below. Note that the changes were extensive and so this is just a brief overview and does not address all of the changes.
Individual Income Tax
The reform act generally reduced tax rates - especially for those with higher incomes. Most notably the top rate was reduced from 39.6% to 37%.
The standard deduction was substantially increased from $6,350 to $12,200 (for a single person) and from $12,700 to $24,400 for couple filing jointly. At the same time the personal exemption ($4,050per tax payer and dependent) was eliminated.
Changes were made to the Alternative Minimum Tax increasing the exemption levels so that fewer people will end up paying AMT.
Estate Tax
For deaths occurring between 2018 and 2025 only estates that exceed $11.2 million ($22.4m for married couples aggregating their exemptions) are subject to estate tax.
Pass Through Taxation
Taxes on many types of business income sourced in the U.S. or Puerto Rico generated by a pass-through entity (e.g. LLCs, S-corporations and partnerships) benefit from a 20% deduction.
Corporate Tax
The corporate tax rate was lowered from 35% to 21% at the same time some deductions and credits were eliminated. The Act also fundamentally overhauled the way in which the Us taxes the profits of US owned foreign corporations. In particular the new provisions for the taxation for Global Intangible Low Taxed Income (GILTI) are likely to have a major impact many Americans who either control or who own more than 10% of a UK company.
Individual Income Tax
The reform act generally reduced tax rates - especially for those with higher incomes. Most notably the top rate was reduced from 39.6% to 37%.
The standard deduction was substantially increased from $6,350 to $12,200 (for a single person) and from $12,700 to $24,400 for couple filing jointly. At the same time the personal exemption ($4,050per tax payer and dependent) was eliminated.
Changes were made to the Alternative Minimum Tax increasing the exemption levels so that fewer people will end up paying AMT.
Estate Tax
For deaths occurring between 2018 and 2025 only estates that exceed $11.2 million ($22.4m for married couples aggregating their exemptions) are subject to estate tax.
Pass Through Taxation
Taxes on many types of business income sourced in the U.S. or Puerto Rico generated by a pass-through entity (e.g. LLCs, S-corporations and partnerships) benefit from a 20% deduction.
Corporate Tax
The corporate tax rate was lowered from 35% to 21% at the same time some deductions and credits were eliminated. The Act also fundamentally overhauled the way in which the Us taxes the profits of US owned foreign corporations. In particular the new provisions for the taxation for Global Intangible Low Taxed Income (GILTI) are likely to have a major impact many Americans who either control or who own more than 10% of a UK company.