<P> Under current law, estates that exceed $5.6 million are subject to a 40% tax at time of death . The TCJA doubles the taxable threshold to $11.2 million . </P> <P> The final bill reduces pass - through taxes via a 20% deduction, after which a lower rate of 29.6% will be applied . This benefit phases out starting at $315,000 . Many businesses are incorporated as pass - through entities (e.g., partnerships, and S - corporations) meaning the owners pay taxes at individual rates . These represent 95% of businesses and most of corporate tax revenues . Approximately the largest 2% of pass - through businesses represent 40% of pass - through income and under current law are taxed at 39.6%, the top individual rate . </P> <P> The corporate tax rate would fall from 35% to 21%, while some related business deductions and credits would either be reduced or eliminated . The Act would also change the U.S. from a global to a territorial tax system with respect to corporate income tax . Instead of a corporation paying the U.S. tax rate (35%) for income earned in any country (less a credit for taxes paid to that country), each subsidiary would pay the tax rate of the country in which it is legally established . In other words, under a territorial tax system, the corporation saves the difference between the generally higher U.S. tax rate and the lower rate of the country in which the subsidiary is legally established . Bloomberg Journalist Matt Levine explained the concept: "If we're incorporated in the U.S. (under today's global tax regime), we'll pay 35 percent taxes on our income in the U.S. and Canada and Mexico and Ireland and Bermuda and the Cayman Islands, but if we're incorporated in Canada (under a territorial tax regime, proposed by the Act), we'll pay 35 percent on our income in the U.S. but 15 percent in Canada and 30 percent in Mexico and 12.5 percent in Ireland and zero percent in Bermuda and zero percent in the Cayman Islands ." In theory, the law would reduce the incentive for tax inversion, which is used today to obtain the benefits of a territorial tax system by moving U.S. corporate headquarters to other countries . </P> <P> One time repatriation tax of profits in overseas subsidiaries of 8%, 15.5% for cash . U.S. multinationals have accumulated nearly $3 trillion offshore, much of it subsidiaries in tax haven countries . The Act may encourage companies to bring the money home over time, but at these much lower rates . </P>

When does tax cuts and jobs act go into effect