What’s in the Final Tax Bill

January 1, 2018

House and Senate Republicans have released a final plan to resolve the differences between their tax overhaul bills. The legislation would cut taxes for corporations. American taxpayers, in large part, would also get cuts, though most of the changes affecting taxpayers would expire after 2025.

Income taxes Current Law G.O.P. Bill
The bill would lower individual tax rates overall. But to comply with Senate budget rules, the individual tax cuts would expire after 2025.
Tax brackets Seven Seven, lower overall
Top rate 39.6% 37%
starts at: $426,700 / $480,050
$500,000 / $600,000 (singles/couples)
Alternative Minimum Tax Alternative income tax calculation for high-income taxpayers Keeps, but increases exemption so fewer will pay it
Standard deduction and exemptions
The standard deduction would nearly double, so many more people would end up taking it.
Standard deduction $6,500 / $13,000
$12,000 / $24,000 (singles/couples)
Personal exemptions $4,150 per taxpayer and dependent Eliminates
Family tax credits
The child tax credit would double, and it has a larger refundable portion that would allow more lower-income families to benefit.
Child tax credit $1,000 $2,000
Refundable portion: 15% of earnings over $3,000 Up to $1,400
Credit for other dependents None $500
Family tax credits phase out starting at: $75,000 / $110,000
$200,000 / $400,000
The biggest long-term change for taxpayers in the bill, it would result in a tax increase over the long run, long after the tax cuts expire.
Inflation measure used for certain income thresholds Consumer Price Index (CPI) Chained CPI (C-CPI), a less generous measure


Current Law

G.O.P. Bill

Education credits American Opportunity Tax Credit, Lifetime Learning Credit and Hope Scholarship Credit No change
Student loan interest deduction Can deduct up to $2,500 No change
Graduate student tuition waivers Tuition waivers are not treated as taxable income No change
A big victory for families that send their children to private school.
Education savings plans None Expands use of 529 college savings accounts to include K-12 private school tuition
Deduction for classroom expenses $250 deduction No change
Itemized deductions
Some Republican representatives in high-tax districts have said they will vote “no” because of the scaling back of the “SALT” deduction.
State and local tax deduction Income or sales and property taxes are deductible All state and local tax deductions limited to $10,000
Mortgage interest deduction Can deduct interest payments on up to $1 million of debt Limited to payments on $750,000 of debt
Moving expenses Can deduct personal expenses Eliminates, except for members of the military
Employer-provided expense reimbursements are excluded Eliminates, except for members of the military
This deduction, which would have been eliminated by the House bill, is most important to low-income taxpayers with high out-of-pocket health care costs.
Medical expenses deduction Can deduct out-of-pocket expenses in excess of 10% of adjusted gross income Expands by reducing threshold to 7.5% of income Applies to 2017 and 2018
Overall limit on itemized deductions Phase out beginning at $266,700 / $320,000
Other individual taxes
This provision, estimated to save over $300 billion, would severely weaken the Affordable Care Act.
Individual mandate Penalty for not having health insurance Eliminates Starts in 2019
Estate tax Top rate of 40% on estates above $5.6 million Increases threshold to estates above $11.2 million
Pass-through income Taxed at individual rates 20% deduction, phasing out starting at $315,000 of income for couples
Capital gains Top rate of 23.8% (including net investment income tax) No change
Corporate taxes Current Law G.O.P. Bill
The largest tax cut in the bill would be permanent, as would other corporate tax changes.
Top corporate tax rate 35% 21%
Business interest deduction Generally fully deductible Caps deduction at 30% of income (excluding depreciation)
The Senate’s decision to keep the corporate A.M.T. was reversed after blowback from several industries.
Alternative Minimum Tax Alternative income tax calculation for businesses Eliminates
New investment purchases Complex rules for deducting over many years Five years of full expensing, then phased out over five more years
Section 179 expensing Small business expensing limited to $500,000 Increases limit to $1 million
The bill raised money by speeding up the effective dates for these last two provisions, which were included in the Senate bill.
Net operating losses Can deduct net operating losses from income in other years Limits the deduction to 80% of taxable income
Research and development expenditures Can be immediately deducted Would need to be written off gradually
Business credits and other
Orphan drug tax credit Credit for 50% of qualifed testing expenses Reduces credit rate to 25%
Renewable electricity tax credit Credit for wind power production, phasing out by 2020 No change
Private activity bonds Tax-exempt bonds used to fund low-income housing and other projects No change
The bill would move from the current worldwide tax system, in which income earned abroad is taxed in the United States, to a territorial system in which only domestic profits would be taxed.
Taxation of multinational companies Worldwide system with deferral and credit for taxes paid abroad Modified territorial system with new anti-abuse tax
One-time repatriation tax 8% (15.5% for cash)


This original article appeared in the New York Times and was written by

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