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Tax Cuts and Job Acts

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Tax Cuts and Job Acts

Summarize the purpose of the Tax Cuts and Jobs Act and explain the main objective(s) for its implementation.

The Tax Cuts and Jobs Acts (TCJA)main objective is to reduce the rate of tax in corporations to an internationally competitive level of 12%. The act resulted in the amendment of the Internal Revenue Code in 1986. There are several objectives of the Tax Cuts and Jobs Act. The first goal is to reduce the rates of taxes for individuals and businesses other than canceling the penalty that the Affordable Care Act has enforced. Another aim of the TCJA is to reduce the number of estates, effectively lowering the number of people while eliminating the businesses. The third objective is to limit the interest on mortgages and the deduction on both local and state properties with income taxes. Equally, the TCJA is responsible for improving the family tax credit and eliminating personal exemptions. The strategy effectively reduces the benefits of people in the itemized deductions. 2017, the Tax Cuts and Jobs Act limits several tax breaks. The tax relief may be temporary, but it effectively reduces the tax liabilities for people and individuals (Michel, 2018). Therefore, it plays a key role in reducing the marginal rates of taxes in all the brackets increasing tax credit and the standard deductions. Lastly, it has effectively reformed the itemized deductions in an organization.

Examine three significant changes brought forth by the Tax Cuts and Jobs Act and discuss at least two advantages and/or disadvantages of each.

The three significant changes brought about by the Tax Cuts and Jobs Act include:

Lastly, it has effectively increased family tax credits and deduction rates. The gain is a temporary adjustment of the tax rates, effectively reducing the tax liabilities for organizations and individuals. But, in individuals, TCJA, the annual inflation rate adjustment entails using the C-CPI-U that increases the tax bracket threshold. The strategy pushes taxpayers into higher brackets, increasing their tax liability (Michel, 2018). Also, TCJA has been effective in the suspension of personal exemptions, but there is a rough increase in the standard deduction. The increment is for the separate and joint filers. The strategy is effective as it provides some tax savings for people. The changes might increase the tax bill with more than a single dependant or in situations with itemized deductions. Therefore, there is a reduction in gains for people who itemize their deductions through personal exemptions. Family tax credits are valuable because they are key in reducing the tax bill rather than reducing the amount of income taxed. It ensures there is the availability of child credit for several families.

Analyze the impact that each of the three significant changes has on the taxpayer as an individual and a family.

As discussed in the section above, there are both positive and negative effects on the taxpayers individually and in families. When the tax rate is reduced for people, there is a much lower tax bill, increasing the income level. If there is a gradual increment of inflation, the tax bracket will push individuals into tax brackets that are much higher, resulting in increased tax liability.

If there is an elimination of personal exemptions, there will be a doubling of standard deductions. The strategy will lead to extra tax savings for the taxpayer. On the other hand, the TCJA will increase taxable income and reduce the tax liability for individuals and families (Mathur & Kallen, 2019). On the other hand, families might be highly dependent on individuals who have taken part in the itemized deductions, forcing them to have much higher tax bills. The dependant is partly on the family’s degree level that will gain from the tax credits.

Lastly, the increment in the family tax credit and the deduction standards will decrease the income tax that a person owes to the state or federal government. The individual will have more tax savings, increasing their disposable income for the whole family. There will be a decrease in the tax bill that will directly result in the decrease in the standard deduction, resulting in an adjustment of the gross income and the tax liability.

Recommend tax planning strategies based on the three significant changes identified to maximize tax savings. Provide a rationale.

The organization can use planning strategies to minimize tax savings from the three changes discussed. First, reducing the tax rates for people and business entities can be maximized by dividing the income among the family members and the legal entities (Gale et al., 2019). The strategy’s main aim is to ensure that a huge portion of the income is in the lower tax bracket and, thus, a much lower tax bill. When dealing with eliminating personal exemptions, it is possible to have a person get an IRS credit, including the earned income tax credit. Thus, there will be a reduction in the amount of taxes. While raising the family tax credits and the standards for the deduction, a person can maximize the tax savings by increasing the dependents to claim more tax credits for the family. The lower the tax bracket, the higher the family’s disposable income. Distributing the income is a way of ensuring there is an increase in each individual’s disposable income.

References

Gale, W. G., Gelfond, H., Krupkin, A., Mazur, M. J., & Toder, E. J. (2019). Effects of the Tax Cuts and Jobs Act: A preliminary analysis. National Tax Journal, 71(4), 589-612.

Mathur, A., & Kallen, C. (2019). Estimating the distributional implications of the Tax Cuts and Jobs Act (No. 1010239). American Enterprise Institute.

Michel, A. N. (2018). Tax Reform 2.0: Priorities After the Tax Cuts and Jobs Act of 2017. World, 30(30.2), 24-9.

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Question 

Tax Cuts and Job Acts

The Tax Cuts and Jobs Act was signed on December 22, 2017, and produced some of the most significant impacts on tax law in over 30 years.

Tax Cuts and Job Acts

Overview
In this assignment, you will use your textbook, the Internet, and Strayer Library to research the tax reform changes brought about by the Tax Cuts and Jobs Act and, analyze the impact these changes have on individual taxpayers and identify related tax planning strategies.

Instructions
Write a 3–5 page paper in which you:

  1. Summarize the purpose of the Tax Cuts and Jobs Act and explain the main objective(s) for its implementation.
  2. Examine three significant changes brought forth by the Tax Cuts and Jobs Act and discuss at least two advantages and/or disadvantages of each.
  3. Analyze the impact that each of the three significant changes has on the taxpayer as an individual and a family.
  4. Recommend tax planning strategies to maximize tax savings based on the three significant changes identified. Provide a rationale.
  5. Use the Strayer Library to find at least three academic resources.
    • Internet websites that include a .gov or .org extension qualify as quality academic resources.
    • Note: Wikipedia and similar websites are not considered quality references.

This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.

The specific course learning outcome associated with this assignment:

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