How Will Tax Reform Impact Individuals and Small Business Owners?

The largest overhaul of the U.S. tax code in 31 years appears to be all but a done deal. Tax reform has been a key focal point for financial markets this year, for good reason, as changes in some of the key provisions are set to have meaningful impacts on corporate profitability; though some sectors are poised to benefit more than others. However, there are also important changes that will impact individuals’ and small business owners’ take-home pay. The chart below highlights some of the changes:

There are additional considerations that include:

  • The business tax cuts would be permanent, while reductions for individuals would expire in 2026.
  • Five of the seven individual tax brackets would be reduced.
  • The business pass-through deduction begins to phase out for couples earning more than $315k.
  • Changes to the deductibility of mortgage interest do not apply to homeowners’ existing mortgages.

 

Having passed through the Senate and House, the bill is expected to make it to President Trump’s desk by the end of the week. If all goes according to plan, the president could see his first major legislative victory since taking office 11 months ago.

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