Finance: Tax reform seems imminent — here's where Trump's tax plan will save and cost you most

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Tax reform is on the table.

We compared the Senate Republicans' tax plan to the House Republicans' bill to see how tax reform could affect your money next year.

  • The Senate is aiming for a final vote on their gigantic Republican tax reform bill on Friday afternoon.
  • They appear to have enough votes to pass.
  • We put together a guide comparing how your taxes could change based on what the Senate bill and the House bill contains.

The final vote on the massive tax bill by the Senate Republicans might be coming up on Friday.

Such a vote would come just three weeks after the bill, the Tax Cuts and Jobs Act (TCJA), was introduced.

Republicans seem confident that they have the necessary 50 votes to pass the TCJA. Senate Majority Leader Mitch McConnell told reporters at 12:00 p.m. ET that "we have the votes." (Stay up to date with Business Insider's live blog here.)

But there's been a lot of confusion among Americans about what's in the Senate's version of the bill and what's in the House's version of the bill — and how that would differ from the current law.

We put together a simple guide on how things might shift for you if either of these bills becomes law:

Income taxes and standard deductions for single filers

Under the House's plan, there would be four federal income-tax brackets rather than the seven we have today. The brackets proposed are 12%, 25%, 35%, and 39.6%.

The Senate's version would keep seven brackets but at slightly lower rates and adjusted income ranges. The brackets proposed are 10%, 12%, 22%, 24%, 32%, 35%, and 38.5%.

About 70% of Americans claim the standard deduction when filing their taxes, and their paychecks will almost certainly increase — albeit slightly — if tax reform passes. In 2017, the standard deduction for a single taxpayer is $6,350, plus one personal exemption of $4,050.

Both plans would combine those into one larger standard deduction. For single filers under the House plan: $12,200, and for single filers under the Senate plan: $12,000.

Income taxes and standard deductions for joint filers

About 70% of Americans claim the standard deduction when filing their taxes, and their paychecks will almost certainly increase — albeit slightly — if tax reform passes. In 2017, the standard deduction for a married taxpayer who files jointly is $12,700, plus one personal exemption of $4,050 for each spouse and child.

Both plans would combine those into one larger standard deduction. For joint filers under the House plan: $24,400, and for single filers under the Senate plan: $24,000.

Child tax credit

Current Law House GOP Plan Senate Plan

Provides $1,000 tax credit per child for families making less than $110,000 ($75,000 for single).

Increases the credit to $1,600 per child. Also adds a $300 credit per adult, which will expire in 2023.

Increases the credit to $2,000 per child.

Mortgage interest deduction

Current Law House GOP Plan Senate Plan

Allows the deduction of interest on the first $1 million of a mortgage.

Limits home-mortgage-interest deduction. On new-home purchases, interest on loans up to $500,000 would be deductible.

Retains the deduction of interest on the first $1 million of a mortgage.

SALT and property income tax deductions

Current Law House GOP Plan Senate Plan

Allows taxes paid to states and property taxes to be deducted from federal taxes.

Eliminates deductions for state and local taxes. Caps the deduction for property taxes at $10,000.

Eliminates deductions for state and local taxes and property taxes.

For graduate students

Current Law House GOP Plan Senate Plan

Includes a student loan interest deduction.

Eliminates student loan deduction. Includes provision that would count tuition waivers from students' universities as taxable income (which would increase taxes for many grad students.)

The plan keeps the student loan interest deduction.

Affordable Care Act individual mandate tax

Current Law House GOP Plan Senate Plan

The law imposes tax penalties on people who fail to get health insurance.

No change to the individual mandate tax.

Repeals the individual mandate, which would end tax penalties on people who fail to get health insurance.

Other deductions

Current Law House GOP Plan Senate Plan

There are currently various deductions and loopholes that allow taxpayers to reduce their tax burden.

Eliminates most personal itemized deductions and many credits.

The only deduction explicitly preserved is for charitable gifts and edited home-mortgage interest.

The plan retains deductions for charitable giving, medical expenses, mortgage interest rate deduction.

Alternative Minimum Tax (AMT)

Current Law House GOP Plan Senate Plan

Limits certain tax benefits for higher-income earners.

Eliminates the AMT

Eliminates the AMT

The AMT is a secondary tax calculation that prevents some high-earners with many itemized deductions from reducing their tax bill too far. Incidentally, Trump's own tax bill has been shown to be millions of dollars more because of the tax.

Estate Tax

Current Law House GOP Plan Senate Plan

Taxes estate property valued at more than $5.5 million ($11 million for couples).

Increases the exemption to $11 million ($22 million for couples). Then, the plan would phase out the tax completely after six years.

Increases the exemption to $11 million ($22 million for couples).

Corporate Taxes

Current Law House GOP Plan Senate Plan

Top rate of 35%.

Top rate of 20% for corporations and 25% for small business that pass on profits to owners. The cut is designed to be permanent.

Top rate of 20% for corporations starting in 2019.

Source: https://slimgist.com

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