Who benefits from House tax plan?

Jill on Money

The prime beneficiaries of the House Republicans’ tax plan are evident when you look at the numbers: It contains $1 trillion dollars in tax relief for corporations and businesses, $228 billion for individuals and $172 billion for estates.

How it would affect you depends on where you live, whether you itemize deductions, how many kids you have and how you earn your money. Though the plan is likely to change in the coming weeks, here are some highlights as it now stands:

Tax brackets would be revised to 12 percent (incomes of $0 to $45,000 filing individually and $0 to $90,000 for those married filing jointly); 25 percent ($45,000 to $200,000 indvidual; $90,000 to $260,000 MFJ); 35 percent ($200,000 to $500,000 individual; $260,000 to $1 million MFJ); and 39.6 percent (over $500,000 individual; over $1 million MFJ).

The standard deduction would nearly double to $12,000 for individual filers and $24,000 for those married and filing jointly. Currently, 70 percent use the standard deduction; that figure would likely increase that percentage to 84, and tax filing would be easier for more Americans.

The child tax credit will rise from $1,000 to $1,600. There would also be a new $300 credit for each taxpayer, spouse and nonchild dependent, though it would expire after five years. The threshold for the credit increases to $115,000 for individual filers and $230,000 for those married filing jointly (from $75,000 and $110,000).

Personal exemptions would be eliminated. For itemizers with three or more kids, the loss of exemptions could offset other reductions in the bill.

State and local tax deductions would be repealed, with an asterisk. While homeowners in high-tax localities would not be able to deduct state and local income taxes, those who itemize could take a tax deduction for property taxes up to $10,000.

Mortgage interest would be deductible for loan amounts up to $500,000, down from the current $1 million. The new limit would apply to new purchases after the effective date (Nov. 2), and interest would be deductible only on a taxpayer’s principal residence. Existing loans would be grandfathered.

To qualify for the capital gains exclusion on a home sale ($250,000 for individual filers, $500,000 MFJ), the seller would have to have used the home as his or her principal residence for five of the previous eight years. Exemption would be phased out a dollar for every dollar by which a taxpayer’s adjusted gross income exceeds $250,000 for individual filers and $500,000 for those filing jointly.

The alternative minimum tax would be repealed. This tax was meant to penalize higher-income taxpayers who used deductions/credits to wipe out tax liability.

Corporations and businesses would see a permanent reduction of corporate tax rate from 35 percent to 20 percent. S corporations, LLCs, partnerships and sole proprietorships (aka “pass-throughs”) would see a top rate of 25 percent rate, but only on profits. The rest of the money earned would be taxed as salary and subject to nominal personal income tax rates. Those who provide professional services, such as lawyers, doctors, accountants, consultants and architects, are specifically excluded from the lower rate unless they can prove that they have a capital-intensive business.

Jill Schlesinger, CFP, is a CBS News business analyst. She welcomes comments and questions at askjill@moneywatch.com.