The Internal Revenue Service (IRS) released its annual inflation adjustments for many tax benefits applicable for tax year 2018 (returns filed in 2019). The standard deduction for taxpayers who are married filing jointly will increase slightly to $13,000; for single and separately filing married taxpayers, the standard deduction will also increase slightly, to $6,500. For tax year 2018, the foreign earned income exclusion is $104,100, up from $102,100 for tax year 2017. The annual exclusion for gifts increased to $15,000, an increase of $1,000 from the exclusion for tax year 2017.
President Trump and several key members of Congress have released their proposal for federal tax reform. Their main goals are to simplify the tax code, lower tax rates, increase the competitiveness of American businesses in the international arena, and repatriate dollars currently held in offshore accounts.
The United States Senate Committee on Finance held a hearing on September 19, 2017, to address business tax reform goals. Chairman Orrin Hatch focused his opening remarks on the need to reduce corporate tax rates to remain competitive in the international market and to reduce the burden on the American working class. He recommended allowing businesses to deduct dividends paid as a way to offset what he interpreted as double-taxation, since investors are also taxed on dividends received. He also stressed the need to find a way to reduce the tax burden on pass-through entities such as sole proprietorships, LLCs, and partnerships.
As of January 1st, your dollar will go a little further as California reduces its sales tax rate by 0.25%. Actual sales tax rates vary by county and city. To look up the current sales tax rate where you live, click here.
The temporary statewide sales and use tax increase approved through California's Proposition 30 expires on December 31, 2016. Effective January 1, 2017, the state sales and use tax rate in California will decrease by 0.25% to the new rate of 7.25%. The California State Board of Equalization notes, however, that in many cities and counties the total tax rate will be higher due to local voter-approved district taxes.