Everything You Need to Know About the GOP Tax Bill
Everything You Need to Know About the GOP Tax Bill
December 15, 2017, 8:20 AM PST Updated on December 15,
2017, 2:46 PM PST
Here are key changes to U.S. tax law for individuals and
businesses that have emerged from the final Republican bill that’s headed for
votes in the House and Senate next week.
Individual Tax Rates
(Note: Individual rate cuts would expire after 2025.)
Current law:
Seven rates, starting at 10 percent and reaching 39.6
percent for incomes above $418,401 for singles and $470,701 for married, joint
filers.
Proposed:
Seven rates, starting at 10 percent and reaching 37
percent for incomes above $500,000 for singles and $600,000 for married, joint
filers.
For joint filers:
10 percent: $0 to $19,050
12 percent: $19,050 to $77,400
22 percent: $77,400 to $165,000
24 percent: $165,000 to $315,000
32 percent: $315,000 to $400,000
35 percent: $400,000 to $600,000
37 percent: $600,000 and above
For single filers:
10 percent: $0 to $9,525
12 percent: $9,525 to $38,700
22 percent: $38,700 to $82,500
24 percent: $82,500 to $157,500
32 percent: $157,500 to $200,000
35 percent: $200,000 to $500,000
37 percent: $500,000 and above
Corporate Tax Rate
Current law: 35 percent
Proposed: 21 percent, beginning in 2018.
Corporate Alternative Minimum Tax
Current law: Applies a 20 percent rate as part of a
parallel tax system that limits tax benefits to prevent large-scale tax
avoidance. Companies must calculate their ordinary tax and AMT tax, and pay
whichever is higher.
Proposed: Repealed.
Pass-Through Deduction
Current law: Pass-through businesses, which include
partnerships, limited liability companies, S corporations and sole
proprietorships, pass their income to their owners, who pay tax at their
individual rates.
Proposed: Owners could apply a 20 percent deduction to
their business income, subject to limits that would begin at $315,000 for
married couples (or half that for single taxpayers).
Standard Deduction
Current law: $6,350 standard deduction for single
taxpayers and $12,700 for married couples, filing jointly.
Proposed: $12,000 standard deduction for single taxpayers
and $24,000 for married couples, filing jointly.
Individual State and Local Tax Deductions
Current law: Individuals can deduct the state and local
taxes they pay, but the value is subject to certain limits for high earners.
Proposed: Individuals can deduct no more than $10,000
worth of the deductions, which could include a combination of property taxes
and either sales or income taxes.
Obamacare Individual Mandate
Current law: An individual who fails to buy health
insurance must pay penalties of $695 (higher for families) or 2.5 percent of
their household income -- whichever is higher, but capped at the national
average cost of the most basic, low-premium, high-deductible plan.
Proposed: Repeal the penalties.
Mortgage Interest Deduction
Current law: Deductible mortgage interest is capped at
loans of $1 million.
Proposed: Deductible mortgage interest for new purchases
of first or second homes would be capped at loans of $750,000.
Medical Expense Deduction
Current law: Qualified medical expenses that exceed 10
percent of the taxpayer’s adjusted gross income are deductible.
Proposed: Reduce the threshold to 7.5 percent of AGI for
2018 and 2019.
Child Tax Credit
Current law: A $1,000 credit for each child under 17. The
credit begins phasing out for couples earning more than $110,000. The credit is
at least partially refundable to qualified taxpayers who earned more than
$3,000.
Proposed: Double the credit to $2,000 and provide it for
each child under 18 through 2024. Raise the phase-out amount to $500,000, and
cap the refundable portion at $1,400 in 2018.
Estate Tax
Current law: Applies a 40 percent levy on estates worth
more than $5.49 million for individuals and $10.98 million for couples.
Proposed: Double the thresholds so the levy applies to
fewer estates. The higher thresholds would sunset in 2026.
— With assistance by John Voskuhl
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