What’s in the tax bill

What’s in the new tax bill

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taxes

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. Several lawmakers called it an agreement “in principle” and some provisions are still being fine-tuned. No details of the agreement have been formally released, but much is known about the central pieces, based on conversations with lawmakers and congressional staffers.

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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

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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. The number of brackets and the income thresholds for each weren’t immediately available, nor was whether the individual provisions would expire as the Senate proposed.

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, which would raise about $318 billion over a decade, according to congressional scorekeepers.

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 so-called pass-through income.  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.

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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 exemptions.

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 in mortgage debt.

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 of AGI for two years. 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

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