The potential for sweeping regulatory reform has dominated the news in recent weeks, as the new administration and Congress have worked to implement legislation related to both tax and healthcare reform. While no official legislation has been passed, here are the key items you need to know.
In late April, President Trump unveiled the key points in what could be the largest tax overhaul since 1986. This includes reducing the current individual tax rate structure from seven brackets down to three: 10%, 25%, and 35%. This would result in a 4.6% reduction in the top overall marginal tax rate which is currently set at 39.6%. A second significant change would be increasing the standard deduction to $24,000, which is almost double the current amount of $12,700 for a married couple. This would result in fewer taxpayers needing to itemize their deductions. In turn, many deductions such as the one for state and local income taxes could soon be eliminated. Nevertheless, the administration has promised to protect popular deductions like the mortgage interest and charitable deduction. Other tax complexities including the Alternative Minimum Tax, 3.8% net investment income tax, and the estate tax are likely to be on the chopping block.
With regards to business taxes, the administration is proposing to lower the current corporate tax rate from 35% to 15% and would potentially allow some income from pass-through entities to be taxed at the 15% rate as well. Currently, the owners of pass-through entities such as LLC’s and S-corporations are taxed on business income at their marginal ordinary income tax rates.
Owners and managers of construction industry companies need to be aware of how these proposed changes may impact both their business and personal tax situations. Our YHB team is closely monitoring the tax reform process, and will provide updates as soon as any significant legislation is passed.
Healthcare Reform has been one of the most widely debated topics since the enactment of the Affordable Care Act in 2010. In late March, the new administration’s first attempt to overhaul Obamacare was thwarted when the bill was pulled from the House floor prior to a vote due to lack of support. A follow up bill has since been passed by the House in early May which would essentially repeal many key provisions of the Affordable Care Act. The bill must still be approved by the Senate, and could be modified from its existing form.
Health insurance and other benefit costs play a huge role in attracting and retaining quality talent. Thus, this legislation has the potential to impact construction industry companies of all sizes.
Spring and summer is the time for you to focus on what you do best, which is delivering quality projects on-time and on-budget. Rest assured that your team of trusted advisors at YHB are here to help you navigate through the regulatory issues while you focus on running your business.
Chris joined Yount, Hyde and Barbour, P.C. in 2004 after graduating from Virginia Tech, where he earned a B.S. degree in accounting. During his time with the firm, Chris has focused his efforts on providing audit, review, compilation and tax services to clients in a variety of industries, including construction and real estate and not-for-profit entities. Chris also specializes in assisting clients with strategic performance management, including the implementation of dashboards and overall process improvements.