The bill eliminates exemptions, cuts back deductions and lowers rates, but many of the changes for indviduals are temporary.
Republican House and Senate negotiators released a final tax bill on Friday that would overhaul the individual and corporate codes after making last-minute changes that appeared to lock down the votes needed for passage.
Raising the child tax credit won over at least one GOP holdout, Sen. Marco Rubio, who said on Friday he would be a yes after threatening to scuttle the deal only 24 hours earlier.
And in a major reversal, Sen. Bob Corker of Tennessee, said Friday he would support the bill, despite voting against a similar bill earlier this month because of concerns it would add to the national debt.
“This bill is far from perfect, and left to my own accord, we would have reached bipartisan consensus on legislation that avoided any chance of adding to the deficit,” Corker said in a statement Friday. He said he decided to support the bill now because the country is “better off with it” than without it.
Those two new « yes » votes put the bill on solid ground for final passage next week, that would allow President Trump to sign it into law by Christmas.
Here’s a look at what’s in the bill:
Personal exemptions, which in 2017 reduce taxable income by $4,050 each for taxpayers, spouses and dependent children.
The standard deduction, from $12,700 this year to $24,000 next year for couples filing jointly. For individuals, the amount goes from $6,350 to $12,000.
New maximum of $10,000 for a combination of property and income taxes or property and sales taxes.
Remain deductible for those who itemize, and the current limitation of 50% of income is increased to 60%.
Increased from $1,000 per child to $2,000 of which $1,400 is refundable, meaning it would be paid to parents even if they do not owe income tax. Value of the credit begins to decrease when family income exceeds $400,000.
Remains deductible for those who itemize, but for new mortgages on first and second homes, only the interest on the first $750,000 borrowed is deductible. The interest on home equity loans will no longer be deductible.
Changes to the individual tax code are effective Jan. 1. Therefore, they will not affect quarterly payments due in January or the tax return due in April, since those cover income earned in 2017.
Taxpayers could still experience new rates this winter because the Internal Revenue Service says it could have information out by February on how workers could adjust withholding from their paychecks.
Most individual changes would expire at the end of 2025, meaning the old tax code rates and deductions would kick back in 2026, unless Congress passes another law before then.
Exemption is doubled so no estate worth less than nearly $11 million would be taxed.
Businesses income reported on owners’ personal tax returns would get a 20% deduction on the first $315,000 of joint income. The bill contains « safeguards » to ensure wealthy taxpayers are not able to disguise personal income as business income to get lower rates.
New 21% rate would take effect Jan. 1 and unlike changes for individuals, it would be permanent. Assets held by U. S. corporations overseas would face a one-time « deemed repatriation » tax of 8% on fixed assets and 15.5% on cash.
Lifts the ban on drilling for a portion of the Arctic National Wildlife Refuge, a provision not related to the tax code but one that was in the same budget resolution that set up the process the Senate will use to pass the tax bill with only 51 votes, rather than the 60 needed to end filibusters on normal legislation.
Starting in 2019, the Affordable Care Act mandate that people have insurance or face a fine imposed by the IRS would be repealed. This is expected to save more than $300 billion over the coming decade, which was applied to offset the cost of tax reductions. Separate legislation is expected to be considered to stabilize insurance marketplaces as part of an agreement to win the support of Sen. Susan Collins, R-Maine, who opposed the mandate repeal.
The Congressional Budget Office said the repeal would reduce the number of people with insurance by 13 million within 10 years because fewer will enroll in Medicaid or buy coverage in government-managed exchanges, including some who will no longer be able to afford insurance because rates will rise about 10% annually.
Repealed for corporations. Remains for individuals, but exemption increased to $1 million for couples.
The bill does not change the ban on churches and other charities from endorsing political candidates. The bill that passed the House would have repealed this restriction.
Student loan interest would continue to be deductible. The deferred tuition provided to graduate students who teach or the children of university employees would not be taxable.
People could continue to deduct medical expenses. For 2018 and 2019, expenses exceeding 7.5% of income are deductible; that percentage increases to 10%, the current level, in 2020.
No longer deductible unless covered by specific federal disaster declarations.
New 1.4% tax on investment earnings for schools with endowments greater than $500,000 per paying student.
Starting in 2019, alimony would no longer be deductible by the payor for new decrees. Payments would be excluded from the recipient’s income.
Teachers could still deduct supplies they buy for their classrooms.
