After much discussion, build up and suspense, House Republicans have officially released key details behind their proposed tax bill. The bill would repeal the estate tax (‘death tax’) in 2024. After much back and forth over contribution limits to 401(k) retirement accounts, the bill will not make changes to 401(k) accounts. The top tax rate will remain at 39.6 percent.
What does that mean for your estate plan? At this time, it means to plan cautiously as the bill in its current form may or may not ultimately become law. The bill is being touted as the first major reform to the tax code since the Reagan administration. Similar to 2009 and 2010, you may start to see individuals planning for certain contingencies in law in their estate planning documents.
There is a long way to go before the bill becomes law and there is still uncertainty about whether there will be enough votes to actually pass it. One point of contention within the Republican party is the elimination of the State income tax deduction. Currently, you are able to deduct the state income taxes paid on your federal return. The new bill proposes this deduction be eliminated. Republicans in high tax states, such as New York and New Jersey, have come out against this provision.
Stay tuned; it should be an interesting next few weeks. The President indicated he would like to see the bill become law by Christmas.