Following the passage of the 2018 fiscal budget, the U.S. tax reform has ushered in more major positive news.
The "toughest" tax reform bill in U.S. history has been released! Individual income tax brackets reduced to five, and corporate tax cut to 20% at once!
What are the specific changes in the tax reform proposal that Chinese people care about most and that directly affect our wallets?
Join the editors at Worldway Immigration Group to take a look at the future direction of your finances!
On November 2, U.S. local time, House Republicans unveiled a 429-page tax reform proposal titled the "Tax Cuts and Jobs Act," which provides tax cuts for businesses and families. The Republican Party stated that the tax reform draft could provide an average tax cut of $1,182 for a U.S. family of four. This is undoubtedly the most significant tax reform proposal in U.S. history!
According to the tax cut details, it generally includes the following key points:
Key Points of the Latest U.S. Tax Proposal
I. Individual Income Tax
1. Simplification of individual income tax brackets
The original individual income tax brackets are reduced from seven to three, with tax rates of 12%, 25%, and 35%, while maintaining the current top income tax rate of 39.6% for the wealthy.
● Annual income under $24,000 is exempt from income tax (tax rate of 0%);
● 12%: Single annual income under $45,000, married filing jointly annual income under $90,000;
● 25%: Single annual income under $200,000, married filing jointly annual income under $260,000;
● 35%: Single annual income under $500,000, married filing jointly annual income under $1,000,000.
● Those exceeding the 35% threshold, such as married couples filing jointly with an annual income exceeding $1,000,000, are subject to an income tax rate of 39.6%.
2. Doubling the individual income tax exemption
The standard deduction for married couples filing jointly is increased from the current $12,700 to $24,000, and for singles from the current $6,530 to $12,000. This means that married couples filing jointly with an income under $24,000 do not need to pay taxes.
3. Increasing the child tax credit
The child tax credit is increased from the current $1,000 to $1,600. Additionally, a new tax credit item is added, allowing parents and those supporting non-child dependents (such as elderly family members) to enjoy a $300 tax credit.
4. Tax deductions
● Retain property tax deduction (capped at $10,000)
● Retain mortgage interest deduction (new mortgages capped at $500,000; interest on the excess amount is no longer deductible. Existing mortgages remain unchanged, with the cap still at $1,000,000.)
● Retain charitable donation deduction
● Eliminate other tax deductions, including state and local taxes (this has a greater impact on residents in deep-blue states with high state taxes, such as California and New York)
5. No impact on the 401(k) retirement plan
II. Corporate Tax
One-time reduction of the corporate tax rate from 35% to 20%. Additionally, family-owned small businesses, including sole proprietorships, partnerships, and S-corporations, will all be subject to a new income tax rate of 25%. A minimum tax of 10% will be imposed on the overseas earnings of U.S. companies.
III. Estate Tax
Double the exemption threshold for estate tax assets, with plans to abolish the estate tax in six years.
Is the most significant tax reform proposal what you wanted?
After the tax reform proposal was released, there are bound to be some who are happy and some who are worried.
Who benefits the most? It is a huge benefit for low-income groups in the U.S., ordinary middle-class families with an annual income of less than $100,000, families with young children, and ultra-high-income families with an annual salary between $480,050 and $1,000,000.
At the same time, it has a significant impact on most Chinese-owned companies and Chinese people who want to start businesses in the U.S. Because many Chinese people who go to the U.S. start their own businesses, such as Chinese restaurants, law firms, dental clinics, accounting firms, etc., high corporate taxes have put great pressure on their operations. Now that corporate taxes have dropped sharply, they finally have a chance to breathe and can gain more room for survival.
Of course, the biggest winners are the wealthy. Although Trump promised that any reform would focus on the middle class and primarily reduce the burden on the middle class, in reality, the wealthy benefit the most. The biggest beneficiaries are the wealthy who account for 20% of the total household income in the U.S., families with an annual income of over $480,000. Currently, the highest individual income tax bracket remains unchanged at 39.6%, but the estate tax may be permanently abolished.
In short, the U.S. tax reform will significantly cut taxes for businesses and the wealthy. For investors, investing in the U.S. will usher in a better time.
With the implementation of CRS in China and Trump's significant tax cuts, global capital will compete to flow into the U.S. As an emerging tax haven, the U.S. will attract more high-net-worth individuals to immigrate here. As an important means of personal investment, EB-5 investment can not only allocate RMB assets into USD assets but also allow the whole family to obtain a U.S. Green Card. It is an important way for today's high-net-worth individuals to allocate global assets.
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