Topics to Discuss
- Introduction: Tax Reform in U.S.A. and Internationally
- Corporate tax rates
- Individual tax rates
- Estate tax
- Limits on interest deductibility
- Territorial system of international taxation
- Capital gains on sales of U.S. partnership interests
Corporate Tax Rates
- Top federal rate of 35% reduced to 21%
- In states with high state taxes, such as New York and California, the combined federal and state tax rate is in the range of 25%‐27%, comparable to Canada's combined federal and provincial rates
- Accordingly, the previous cross‐border tax rate arbitrage in favour of Canada is gone
Individual Tax Rates
- Top federal rate lowered from 39.6% to 37% but "sunset" in 2025
- In states (and even in some cities, such as New York) with local income taxes, the combined top rate is in the range of 42% to 44%
- Long‐term capital gains and qualified dividends still taxed at 20%
- Net investment income tax unchanged at 3.8%
Individual tax rates on pass‐through income
- U.S. individuals have used pass‐through entities to earn business income and obtain limited liability protection where possible, e.g. partnership, "S" corporation, limited liability company
- Individuals can now deduct up to 20% of their domestic "qualified business income", and 20% of their aggregate "qualified REIT dividends"
- As a result, the effective top individual tax rate on this passthrough income is 29.6% (using 37% as the top rate)
- 20% deduction expires in 8 years
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