eBay posted an announcement about tax reform on its eBay Main Street blog, the company’s grassroots initiative run by its lobbying department. It called out some provisions of the bill passed by the Senate over the weekend, which has some differences with the House bill that must be reconciled.
One provision it called out that would affect a significant portion of online sellers deals with so called pass throughs, which include sole proprietorships, partnerships, and S corporations.
The Tax Policy Center wrote in May about proposals the Trump administration and House Republicans were developing that would reduce the individual income tax rate on income earned through pass-through entities. “Under these proposals, the differential between the tax rates on pass-through income and ordinary wages would create an incentive for many earners to re-characterize their wage income to qualify for the preferential tax rates.”
CNBC went so far as to write an article today, “Here’s how to become a pass-through entity,” but that doesn’t mean you should rush right out to incorporate, it said. “In exchange for those lower rates, pass-through owners may take on an even greater deal of responsibility and expense in bookkeeping and payroll needs.” The article explains the issue and how the Senate and House bills differ when it comes to tax breaks for small businesses.
eBay noted there’s pressure on Congress to get a bill on the President’s desk before Christmas, and a lot can happen between now and then.
Press release follows:
Tax reform is a hot topic in the US this holiday season, with much activity at the federal level. On Saturday, the Senate passed H.R. 1, the Tax Cuts and Jobs Act, by a vote of 51-49. Prior to Thanksgiving, the House passed a similar bill by a vote of 227 to 205. The House and Senate will now establish a conference committee to reconcile the bills for a final vote. Congressional Republican Leadership and the White House want a bill on the President’s desk before Christmas.
We have provided a few of the notable provisions below:
Individual Income Tax Rates: The House bill condenses the current seven individual income brackets to four: 12%, 25%, 35% and 39.6%. The Senate bill maintains seven brackets but changes them to: 10%, 12%, 22%, 24%, 32%, 35% and 38.5%.
Standard Deduction: Both bills double the standard deduction to $12,000 for individuals and $24,000 for couples.
Home Mortgage Interest Deduction: The House bill limits the deduction to the first $500,000 of the loan for new home purchases (existing loans are grandfathered). The Senate bill retains the current $1 million limit.
State and Local Taxes: Both bills end the deduction for state and local income and sales taxes but allow it for up to $10,000 in property taxes.
Individual Insurance Mandate: The Senate bill repeals the Affordable Care Act’s individual mandate. The House bill does not.
Corporate Tax Rates: Both bills cut the current 35% corporate rate to 20%, but the Senate bill has a one-year delay.
Pass-Throughs: The House bill includes a 25% rate for qualifying pass-through income while the Senate bill includes a 23% deduction.
Business Investment: Both bills include full and immediate expensing for certain qualifying business assets.
This is just a brief overview so we encourage you to visit the House and Senate resource pages for more information. We will keep you updated as important decisions are made.
SOURCE: eBay Main Street Press Release