Highlights of the tax reform bill

November 2, 2017 5:23 PM

After months of discussion and anticipation, Congressional Republicans released their proposed legislation for tax reform on Thursday. The Tax Cuts and Jobs Act will go to the House Ways and Means Committee for markup on Nov. 6, so haggling remains, and not everything in the proposed act may make it into law, but, in the meantime, here are some of the main features of the bill.

U.S. President Donald Trump, center, speaks while holding up "Simple, Fair, 'Postcard' Tax Filing" cards as U.S. House Speaker Paul Ryan, a Republican from Wisconsin, left, and Representative Kevin Brady, a Republican from Texas and chairman of the House Ways and Means Committee, react during a meeting in the Cabinet Room of the White House in Washington, D.C., U.S., on Thursday, Nov. 2, 2017. The House tax bill released Thursday preserves the carried interest tax break despite Trump and GOP leaders' promise to do away with loopholes for the wealthy. Photographer: Olivier Douliery/Bloomberg

Olivier Douliery/Bloomberg

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After months of discussion and anticipation, Congressional Republicans released their proposed legislation for tax reform on Thursday. The Tax Cuts and Jobs Act will go to the House Ways and Means Committee for markup on Nov. 6, so haggling remains, and not everything in the proposed act may make it into law, but, in the meantime, here are some of the main features of the bill.

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For businesses

The main change is bringing the corporate tax rate down to 20 percent from 35 percent, though it would also impose a tax of up to 12 percent on multinational companies’ accumulated offshore earnings. The act also aims to set a maximum pass-through tax rate on business income at no more than 25 percent, which congressional Republicans claim would be the lowest rate on small-business income since WWII. (It would not automatically apply to professional services like accounting, however.)

Tax forms

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New brackets for individuals

The legislation finally specifies four new tax brackets, and their associated income levels:
* 12 percent for households making from $24,000 to $90,000 a year;
* 25 percent for households making from $90,000 to $260,000 a year;
* 35 percent for households making from $260,000 to $1 million a year; and,
* 39.6 percent for households making more than $1 million a year.

Households making less than $24,000 won’t owe any income tax.

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Raising the standard deduction

The standard deduction would rise from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for married couples.

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Mortgage interest deduction

This popular deduction would be lowered to allow taxpayers to deduct interest on up to $500,000 of mortgage debt for newly purchased homes, down from the current max of $1 million.

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State and local tax deductions

The ability to write off state-property and local-property taxes -- the subject of some controversy because it particularly affects several large, high-tax states like New York and California -- has been kept, but would be capped at $10,000. The deduction for income and sales taxes, however, would be repealed.

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A new credit for families

The bill includes a new Family Credit of $300 for each parent and non-child dependent, and would expand the Child Tax Credit from $1,000 to $1,600.

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Repeal of the AMT

The bill would repeal the Alternative Minimum Tax entirely.

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A lingering death for the Death Tax

The bill would immediately double the current estate tax exemption of $5.49 million for individuals, but it would repeal the tax after six years.

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A tax on endowments

As a revenue-raiser, the bill would impose a 1.4 percent tax on university endowments at schools with assets over $100,000 per student.

Things that aren’t changing

The Republican leadership pointed out that several aspects of current tax law will not change; among the most important of those are:
* The Earned Income Tax Credit will remain in place.
* “Popular retirement savings options” like 401(k)s and IRAs will not be affected.
* The charitable deduction will remain in place; and,
* For businesses, the R&D credit will still be available.