Please note that the information presented below is current as of the posting date.
Individuals
Tax Brackets. There are seven brackets in today’s individual tax code: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
The Senate bill calls for seven brackets, but changes the rates on taxable income to 10%, 12%, 22%, 24%, 32%, 35% and 38.5%.
For individuals, the following tax rates apply:
- 10% up to $9,525
- 12% up to $38,700
- 22% up to $70,000
- 24% up to $160,000
- 32% up to $200,000
- 35% up to $500,000
- 38.5% over $500,000
For married couples filing jointly, the following rates apply:
- 10% up to $19,050
- 12% up to $77,400
- 22% up to $140,000
- 24% up to $320,000
- 32% up to $400,000
- 35% up to $1 million
- 38.5% over $1 million
The House bill, only calls for four brackets: 12%, 25%, 35% and 39.6%.
Standard Deduction. The House and Senate bills nearly double the standard deduction. For single filers the Senate bill increases it to $12,000 from $6,350 currently, and it raises it for married couples filing jointly to $24,000 from $12,700.
Personal Exemption. The deduction for personal exemptions is repealed.
Child Tax Credit. The credit is currently $1,000 and is refundable. In the House bill, the child tax credit would increase to $1,600 per child under the age of 17, subject to phaseouts. The first $1,000 would be refundable. In the Senate bill, the child tax credit would bump to $2,000 per child under the age of 18, subject to phaseouts. As with the House bill, the first $1,000 would be refundable.
Alternative Minimum Tax. In the House plan, the AMT is eliminated for individuals and corporations. The Senate plan retains the individual AMT with higher exemption amounts, as well as retains the corporate AMT.
Capital Gains and Dividends. Neither the Senate nor House version of pending legislation cuts the tax rate on capital gains and dividend income. The current maximum tax rate would remain at 23.8% (20% plus the 3.8% Medicare tax for taxpayers with income above $200,000 or $250,000 married filing jointly).
Estate Tax. The House plan increases the exemption to $10 million, indexed for inflation, with repeal after six years. The Senate plan would increase the estate tax exemption to $10 million, indexed for inflation, without repeal.
Mortgage Interest Deduction. In the House plan, the mortgage interest deduction remains, but with a few changes such as allowing interest deduction for up to $500,000 (currently $1 million) in mortgage principal on new homes. Existing mortgages are grandfathered in. The Senate plan keeps the mortgage interest deduction for acquisition debt but eliminates the deduction for equity debt.
State and Local Income Tax Deduction. Both the House and Senate versions removes all the deductions of state and local income taxes.
Property Tax Deductions. Both the House and Senate versions limit the amount of the property tax deduction to a maximum of $10,000.
Charitable Contributions. Deductions for charitable donations remain in both versions.
Medical Expense Deductions. The House version repeals the deductions. The Senate version retains the deduction for tax years 2017 and 2018 and allows it to be taken if eligible expenses exceed 7.5% of AGI rather than 10% under current law.
Student Loan Interest Deduction. The House bill would repeal the tax deduction for student loan interest and tax tuition waivers. The Senate version leaves the current provisions intact. The Senate plan also excludes a House proposal to roll three higher-education tax credits into one benefit.
Miscellaneous Deductions. Both the House and Senate versions repeal most if not all of the miscellaneous itemized deductions that are subject to the 2% floor under current law.
Adoption Tax Credit. Both bills preserve the adoption tax credit.
Individual mandate. The Senate bill would repeal the individual mandate. The House version has no such provision.
Businesses
Corporate Tax Rate. Both the Senate and House bills would cut the current 35% rate to 20%, but the Senate bill has a one-year delay in dropping the rate.
Business Expensing. Both the House and Senate bills significantly increase the ability for businesses to immediately write-off the full cost of equipment. The Senate bill would use a “step-down” approach that phases out the expensing benefit after five years rather than an immediate cliff.
Business Entertainment Expenses Deduction. Both bills would eliminate the deduction for business entertainment expenses.
Pass-through Entities. The House bill would cap the pass-through rate at 25%, then set anti-abuse rules that begin with the rebuttable presumption that 70% of pass-through income is wage income (subject to the regular rate schedule), while 30% is business income (subject to the lower rate cap), while excluding many professional service companies from the preferential rate. The Senate bill adopts a 23% deduction for pass-through income (limited to 50% of wage income) for qualifying businesses.
Research & Development Tax Credit. The House bill would not make any changes to the current research & development tax credits. Currently, the Senate bill is more complicated because they decided to preserve the corporate alternative minimum tax instead of repealing it as planned. By doing so, many experts believe this change will have unintended consequences, forcing many companies to lose these tax breaks.
Work Opportunity Tax Credit. The House bill repeals this tax credit entirely, while the Senate version retains it.
