US Tax Reform: This May Not Be the End

Congress successfully passed sweeping changes to US tax policy, which President Trump signed into law in December. Some of the earlier proposals contained changes that could have had a detrimental impact on the way many people save and invest for retirement, but fortunately, they were not included in the final bill. Pierre Caramazza and Michael Doshier are pleased our current retirement savings system was left largely intact, but caution that this tax legislation still has some open items. Whether addressed with a technical corrections bill next year or through IRS regulation, the refinement of the details will likely last well into next year, and the effects will be felt for years to come. They outline a few areas of interest to investors in the legislation as it stands today.

The first major revision to the tax code in more than 30 years has now been signed into law. While the legislation will touch nearly every US citizen, the impacts on individuals and businesses will vary. Some will wind up owing less, or see certain tax benefits go away.

As our area of interest is investing—particularly saving for retirement—we are very pleased that current provisions aimed at helping Americans save and invest for retirement were left largely intact. The convenience of being able to contribute directly to an employer-sponsored retirement plan through payroll deduction makes it easy for millions of Americans to save for retirement—and that will still be possible.

It’s important to note that most of the tax changes are set to take effect on January 1, 2018. The majority of the provisions targeting individuals in the new tax plan are set to expire at the end of 2025, while others (including a lowering of the corporate tax rate) are permanent.