Tax reform jumped another major hurdle this past weekend when the Senate passed its tax bill. The next step will be a House-Senate conference committee that will meet and reconcile the two bills and hammer out a final version that both chambers will then vote on.
The House and Senate generally agree on these changes:
- Eliminate deductions for state and local income and sales tax. Preserves a deduction for real estate taxes capped at $ 10,000
- Standard deductions increased to $ 12,000 for singles & $ 24,000 for married couples
- Corporate tax rate lowered from 35% to 20%. (Senate effective date would be 1/1/19)
- Personal exemptions will be eliminated.
- Estate tax exemption is doubled to about $ 11 million (House would repeal the estate tax entirely in 2025)
There are still some major areas of difference between the House & Senate plans:
- Tax rates – House would reduce to four brackets with top rate remaining at 39.6%. Senate would have seven brackets with lower rates and a top rate of 38.5%
- Health insurance – House no change. Senate would repeal the individual mandate to purchase health insurance.
- Pass-throughs – House would cap the top rate at 25% for LLCs, partnerships and S corporations. Senate would introduce a deduction of 23% of pass-through income.
- Alternative Minimum Tax – House would repeal the AMT. Senate would keep it.
Congress will continue the effort to finalize these tax changes before the end of 2017. Most provisions will be effective January 1, 2018.
David K. Raye, CPA, P.C.
*The information in this blog post is general in nature and not intended as specific advice. Please consult a tax advisor to see how this information applies to your specific situation.