House Speaker Ryan is a passionate guy; check out a clip from his speech yesterday:
Lots of talk about the new tax reform bill, the Tax Cuts and Jobs Act, which will soon to be signed into law by President Trump. If you are an investor and have a retirement account, chances are you have already benefited from tax reform with the stock market rally in 2017. Some of this rally must be attributed to the anticipation of this tax reform.
Here are 3 points that may affect you:
1) The biggest change is the corporate tax rate will be reduced to 21% from 35%. This makes American businesses more competitive in the world economy. How does this work? It’s simple…
Companies pay less in taxes = give employees more in wages/bonuses or invest in new employees = employees spend extra income = new spending helps other businesses and overall economy = repeat over again
My friends at AT&T, Boeing, and Fifth Third Bank are happy to hear about the planned bonuses or wage increases in 2018, which were announced yesterday.
2) Most taxpayers will see their tax burdens decline and after-tax income rise. The bill reduces income tax rates for just about every taxpayer. Americans will continue to be placed in one of seven tax brackets based on their income. But the rates for some of these brackets have been lowered. The new rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Chances are you will save a few dollars here.
3) Small business owners will also benefit with a 20% deduction. Essentially this will allow a small business owner to deduct, right off the top, 20% of your net business income. As a small business owner, I love this because it rewards entrepreneurship and risk taking. This can give more individuals the incentive to start a business which will equal more jobs and a stronger economy. Chances are some will game the system with this, but overall, we inherit more benefits than costs here.
The only bad news: this all starts in 2018 so no benefit this coming up April.