Republicans reached agreement Wednesday on melding the House and Senate tax legislation into a single bill that they hope to send to President Donald Trump next week. Here are the key details:
Advertisement
1
Corporate tax rates
Current Law
The top corporate rate of 35 percent now applies to taxable income over $10 million a year. There are three other corporate tax brackets — 15 percent, 25 percent and 34 percent.
Conference Agreement
Sets a single corporate tax rate at 21 percent, starting in 2018, up from 20 percent proposed in the House and Senate bills.
2
Alternative Minimum Tax
Current Law
The alternative minimum tax, or AMT, is effectively a minimum tax on the wealthy. On the individual side, it can affect joint filers with incomes of $78,750 or more.
Conference Agreement
Ends the AMT for corporations but keeps it for individuals, while boosting the exemption to $500,000 for single taxpayers and $1 million for couples.
Advertisement
3
Individual tax rates
Current Law
There are now seven individual tax rates — 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent. There’s also a standard deduction of $6,350 for single filers and $12,700 for married couples that helps create a de facto 0 percent bracket.
Conference Agreement
The top tax rate would be set at 37 percent. The standard deduction would be doubled. There would remain seven brackets — 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. Individuals face the 37 percent rate when their incomes exceed $500,000. For joint filers, the threshold is $600,000. For individuals, the 35 percent bracket begins at $200,000, the 32 percent bracket starts at $157,500, the 24 percent bracket kicks in at $82,500, the 22 percent bracket begins at $38,700, the 12 percent bracket starts at $9,525 and the rate is 10 percent for income less than $9,525. For joint filers, the 35 percent bracket begins at $400,000, the 32 percent bracket starts at $315,000, the 24 percent bracket kicks in at $165,000, the 22 percent bracket begins at $77,400, the 12 percent bracket starts at $19,050 and the rate is 10 percent for income less than $19,050.
4
The Affordable Care Act’s individual mandate
Current Law
Obamacare requires individuals to buy health insurance or pay a tax penalty.
Conference Agreement
Repeals the individual mandate beginning in 2019.
5
Pass-through businesses
Current Law
Business income from partnerships, S corporations and sole proprietorships is taxed at individual tax rates.
Conference Agreement
Gives businesses a new 20 percent deduction for the first $315,000 of joint income. Pass-through incomes above that level would also generally get that 20 percent deduction. Other details of the agreement weren’t immediately available.
6
State and local taxes
Current Law
Taxpayers who itemize currently can deduct unlimited state and local income, sales and property taxes.
Conference Agreement
Allows taxpayers to take a property tax deduction in addition to deducting either income taxes or sales taxes, up to a $10,000 limit for all combined.
Advertisement
7
Estate tax
Current Law
Estates passed on to heirs now face a top tax rate of 40 percent, with exemptions this year of up to $5.49 million for individuals and $10.98 million for married couples. The exemption amount is indexed for inflation.
Conference Agreement
Keeps the estate tax but doubles the current exemption levels.
8
Mortgage interest deduction
Current Law
Taxpayers can now deduct interest payments on up to two mortgages worth up to a combined $1 million.
Conference Agreement
Sets the interest cap at $750,000 for mortgages issued after Jan. 1, 2018.
9
Deductions for student loan interest and medical expenses, and a credit for adoption expenses.
Current Law
Eligible taxpayers can now deduct up to $2,500 a year in interest on student loans. Eligible taxpayers can deduct, with some exceptions, medical expenses that exceed 10 percent of a taxpayer’s adjusted gross income for a year. Eligible taxpayers can receive a maximum tax credit of $13,570 for qualified adoption expenses.
Conference Agreement
Preserves the deduction for medical expenses above 10 percent of adjusted gross income but lowers it to 7.5 percent for 2018 and 2019, and then it rises to 10 percent in 2020. Tuition waivers received by graduate students remain tax-free, students can still deduct loan interest payments and bonds that colleges use for construction stay interest-free.
10
Child tax credit
Current Law
Taxpayers may claim a $1,000 credit for each qualifying child under 17. The child credit begins to phase out at $75,000 of adjusted gross income for single taxpayers and $110,000 for married couples.
Conference Agreement
The existing credit is increased to $2,000 for single filers and married couples and is fully refundable up to $1,400. It begins to phase out for families making more than $400,000. Parents must provide a child’s valid Social Security Number in order to receive the benefit.
11
ANWR
Current Law
Oil and gas drilling is restricted in the nearly 1.6 million-acre parcel known as the Arctic National Wildlife Refuge, or ANWR.
Conference Agreement
Two lease sales for drilling rights will be held over the next 10 years for the ANWR territory. Surface development will be limited to 2,000 federal acres of the protected land.