Republicans in Congress are barreling ahead on their sweeping revamp of the nation’s tax code, with votes in the House and Senate on Tuesday and a final vote in the House on Wednesday. President Donald Trump is aching to sign it before Christmas.
Highlights of the legislation, which would make about $1.5 trillion in tax cuts:
— Personal income tax rates: The bill retains the current number of brackets, seven, but changes them to 10, 12, 22, 24, 32, 35 and 37 percent. The top bracket for wealthiest earners, 39.6 under current law, drops to 37 percent. But it will kick in at a lower level, $600,000 per married couple, instead of the current $1 million.
The reductions in personal income tax rates are temporary, ending in 2026.
— Standard deduction: Used by about 70 percent of U.S. taxpayers, currently $6,350 for individuals and $12,700 for married couples. The bill doubles those levels to $12,000 for individuals and $24,000 for couples, expiring in 2026.
— Personal exemption: The bill ends the current $4,050 personal exemption.
— State and local taxes: Ends the unlimited federal deduction for state and local income and sales taxes, allowing the deduction only for a total of up to $10,000 in combined property, income or sales taxes.
— Tax credits: Doubles per-child tax credit to $2,000 for families making up to $400,000 a year. Up to $1,400 of the $2,000 credit is available as a tax refund to lower- and middle-income families with relatively small tax bills. The per-child credit expires in 2026. The bill also provides a tax credit for dependent care for children and older dependents; it retains the current adoption tax credit.
— Home mortgage interest deduction: Limits the deduction to interest paid on the first $750,000 of a new loan for a first or second home. The current limit is $1 million.
— Other deductions: Allows deduction for medical expenses not covered by insurance for 2018 and 2019 when expenses exceed 7.5 percent of adjusted gross income. That rises to 10 percent starting in 2020.
— Individual insurance mandate: Repeals the requirement in Democrat Barack Obama’s health care law that people pay a tax penalty if they don’t purchase health insurance.
— Alaska oil drilling: Bill opens Alaska’s Arctic National Wildlife Refuge to oil and gas drilling.
— Alternative minimum tax: The AMT is aimed at ensuring that higher-earning people and corporations pay at least some tax. For individuals, the bill increases the amount that can be exempted from the AMT. The tax is repealed for corporations.
— Inheritance tax: Currently, when someone dies the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals, $11 million for couples. The bill doubles those limits and repeals the tax in 2025.
— Corporate taxes: Bill slashes the current 35 percent rate to 21 percent starting Jan. 1.
— Pass-through businesses: Millions of U.S. businesses “pass through” their income to individuals, who then pay personal income tax on those earnings, not corporate tax. The bill lets those people deduct 20 percent of the first $315,000 of earnings.
— Businesses: Bill allows companies to immediately write off the full cost of equipment they buy.
— Multinational corporations: Bill ends tax advantages for companies moving overseas.
© 2017 Capitol Hill Blue
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