Different individual tax brackets
The Senate bill has more individual tax brackets than the House bill does, something the two chambers will have to work out in conference. The individual tax cuts are temporary, unlike tax cuts for businesses, which are permanent.
The Senate bill includes these tax brackets:
• 10 percent (for individuals earning up to $9,525 and married couples filing jointly earning up to $19,050)
• 12 percent (from $9,525 to $38,700 for individuals and $77,400 for married couples filing jointly)
• 22 percent (for individuals earning more than $38,700 to $70,000 and over $77,400 to $140,000 for married couples)
• 24 percent (for individuals earning more than $70,000 and up to $160,000, and couples making $140,000 to $320,000)
• 32 percent (for individuals making more than $160,000 to $200,000, and couples earning $320,000 to $400,000)
• 35 percent (for individuals making more than $200,000 and up to $500,000, and married couples earning more than $400,000 to $1 million)
• 38.5 percent (for individuals earning more than $500,000 and couples earning more than $1 million)
The current tax brackets are 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent.
Lower corporate taxes
The bill lowers the corporate tax rate from 35 percent to 20 percent, as Republicans originally intended. These cuts are permanent
Tax break for private school education
An amendment from Cruz allows families to use 529 savings plans, originally intended for college savings, for K-12 education, including private school and home-schooling. Contributions to 529 plans are generally tax free in states. The amendment passed with a tie-breaking vote from Vice President Mike Pence. It was one of the few amendments voted into the bill last minute.
Doubled child tax credit
The Senate bill increases the child tax credit from the current $1,000 per child to $2,000. That will have to be reconciled with the House bill, which only increases the credit to $1,600 per child.
Big changes in state and local tax deductions
The Senate legislation eliminates the deduction for state and local income taxes, like the House bill does. The Senate bill does not entirely eliminate the property tax deduction, but it does limit it to a $10,000 itemized deduction. The House bill does the same thing.
Doubled standard deduction, but no more personal / dependent exemptions
The bill roughly doubles the standard deduction for tax filers, from $6,350 to $12,000 for individual filers and from $12,700 to $24,000 to married couples filing jointly. But the Senate plan also eliminates the personal exemption. Currently, tax filers can claim an exemption of $4,050 for the filer, spouse and each dependent
Finally, Interest on Student loans is no longer deductible.
Remember, this is not final, as the House and Senate will have to work out their differences in Conference. But it’s a great start, and is on track to being finalized by Christmas!
Tax Doctor will update you as changes get implemented. Remember, Tax Doctor does a free evaluation of your tax return(s) upon request. Our free look is free so it’s a win-win situation.
See you soon!