House, Senate leaders strike tax plan deal
A House/Senate conference committee struck a deal Wednesday to reconcile competing federal tax overhaul plans, setting the stage to send the plan to President Donald Trump before Christmas. The legislation, which is still being finalized, is expected to provide the Republican-controlled Congress and the president their first major legislative accomplishment since Trump took office nearly a year ago.
Highlights of the plan include:
Corporate tax rate:
The agreement drops the corporate tax rate to 21 percent from the current 35 percent rate beginning in 2018, rather than 2019. Negotiators agreed to bump it up to 21 percent to help offset revenue losses from other tax breaks, the aides said.
Individual tax rate:
It drops the top individual income tax rate to 37 percent, down from the current rate of 39.6 percent, a change that benefits upper-income households.
Deductions:
The bill also allows individuals to deduct up to $10,000 in state and local taxes, split between property taxes and either income or sales taxes paid. This was done to meet the demands of House Republicans from districts in high-tax states, including California, New York and New Jersey.
Mortgage interest deductions:
It would allow mortgage interest deductions on the first $750,000 of new mortgages. Existing mortgages would be unaffected.
Corporate alternative minimum tax:
It would rescind the corporate alternative minimum tax. The inclusion of this tax in the Senate bill was criticized by many business groups, who said it would prohibit their ability to use tax credits for research and development and other tax breaks.
Individual alternative minimum tax:
The conference bill preserves the individual alternative minimum tax, which the House bill had eliminated and the Senate bill retained in a watered-down form. However, the conference version will apply to even fewer taxpayers
than the Senate bill would have, a congressional aide said.
Pass-through tax deduction:
Keeps a provision allowing a 20 percent tax deduction for so-called pass-through companies, whose owners, including sole proprietors, partners and others, pay taxes on profits through the individual code.
ACA requirement repeal:
It adopts the Senate position to repeal the Affordable Care Act requirement that Americans buy health insurance or face financial penalties.
Graduate school tuition waiver:
It drops a provision that would have treated graduate school tuition waivers as taxable income.