5 Ways the House Tax Reform Plan Could Affect Remodelers
Editor’s Note: The original English version of this article published by Remodeling.hw.net can be viewed here.
The House tax reform bill unveiled Nov. 2 has been getting a chilly reception from advocates for small businesses and home builders.
Some of the disappointment with the house tax reform plan is due to a proposal to change how profits from so-called “pass-through businesses” would be changed. For S Corporations or limited liability companies, the profits are passed through to individual business owners, who pay taxes based on their personal income-tax bracket. Roughly 95 percent of all businesses and 99 percent of businesses with revenues less than $10 million are pass-through corporations.
According to one analysis of the House Tax Reform Plan, 70 percent of the income earned by pass-through businesses would be taxed at the rate of the business owner’s individual tax rate (i.e. 25 percent, 35 percent or 39.6 percent), while the remaining 30 percent would be taxed at a new low rate of 25 percent. Because nearly nine in 10 businesses that pass through their income already pay at the 25 percent rate or less, the National Federation of Independent Business said the House Tax Reform Plan “leaves too many small businesses behind.”
The NFIB said it opposed the entire tax reform bill because the pass-through legislation fell short.
Other provisions of concern including on the House Tax Reform Plan include lowering the cap on the amount of mortgage interest and local property taxes homeowners can deduct on their federal tax return. A proposal to cut tax brackets from seven to four and to double the estate tax exemption, however, could benefit residential contractors.