Chairman of the House Ways and Means Committee Kevin Brady revealed details of the Republican tax reform bill last week. The package, now being debated in the House of Representatives contains expected and unexpected overhaul to the existing tax law.
Not surprisingly, the plan calls for a repeal of the Alternative Minimum Tax (AMT). It also calls for a repeal of the estate tax while keeping the step-up in basis.
The bill redefines like-kind exchanges. The proposal includes language that would amend code section 1031 from exchanges of like-kind property, to exchanges of like-kind real property. This ensures real estate investors maintain the benefit of deferring capital gains realized on the sale of property.
Also favoring real estate activities, the proposal limits the deductions that businesses can claim for interest, with the exception of real estate businesses, where no limit would apply.
According to the nonpartisan Tax Policy Center, the richest 1 percent of Americans would reap 48 percent of the benefits of the Republican tax reform legislation.
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Using the theme of “simplification” the reform reduces the current seven tax brackets with a proposed use of five ranging from 0 percent to 39.6 percent.
About Dominique Molina
Dominique Molina is co-founder and President of the American Institute of Certified Tax Coaches.