Topics to Discuss

  1. Introduction: Tax Reform in U.S.A. and Internationally
  2. Corporate tax rates
  3. Individual tax rates
  4. Estate tax
  5. Limits on interest deductibility
  6. Territorial system of international taxation
  7. Capital gains on sales of U.S. partnership interests

Corporate Tax Rates

  • Top federal rate of 35% reduced to 21%
  • In states with high state taxes, such as New York and California, the combined federal and state tax rate is in the range of 25%‐27%, comparable to Canada's combined federal and provincial rates
  • Accordingly, the previous cross‐border tax rate arbitrage in favour of Canada is gone

Individual Tax Rates

  • Top federal rate lowered from 39.6% to 37% but "sunset" in 2025
  • In states (and even in some cities, such as New York) with local income taxes, the combined top rate is in the range of 42% to 44%
  • Long‐term capital gains and qualified dividends still taxed at 20%
  • Net investment income tax unchanged at 3.8%

Individual tax rates on pass‐through income

  • U.S. individuals have used pass‐through entities to earn business income and obtain limited liability protection where possible, e.g. partnership, "S" corporation, limited liability company
  • Individuals can now deduct up to 20% of their domestic "qualified business income", and 20% of their aggregate "qualified REIT dividends"
  • As a result, the effective top individual tax rate on this passthrough income is 29.6% (using 37% as the top rate)
  • 20% deduction expires in 8 years

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