Breaking down the House’s tax overhaul
The House approved a sweeping overhaul of the tax code crafted by the Republican majority on Thursday. The Senate is working on a different plan that could come up for a vote after Thanksgiving, and both measures would must be reconciled before they could be sent to President Trump.
Here are highlights:
For individuals
The current seven brackets would be compressed to four: 12%, 25%, 35% and 39.6%.
The bottom rate would increase from 10%, but sponsors say people in
10% bracket this year would owe no tax next year.
The top rate would apply to couples whose income exceeds $1 million, compared with $470,700 now.
The standard deduction for a married couple would increase from $12,700 this year to $24,400 next year.
Personal exemptions, this year worth $4,050 each for taxpayers, spouses and children, would be eliminated.
The child tax credit would be increased from $1,000 to $1,600, and be available to couples earning up to
$230,000, up from $110,000 now.
A new credit of $300 each would be created for taxpayers, spouses and adult dependents, though it would expire after five years.
The plan would eliminate the Alternative Minimum Tax, and, by 2024, eliminate the estate tax.
Deductions for state income taxes, medical expenses, mortgage interest on second homes and other expenses such as disaster losses, tax-preparation fees and teachers' costs for classroom supplies would be eliminated.
Taxes on alimony would be charged on the person paying it, rather than the person receiving it.
The property tax deduction would be capped at $10,000.
The limit on the mortgage interest deduction for those who itemize would be lowered from $1 million now to $500,000 for new loans.
Charitable contributions could still be deducted by those who itemize.
Business changes
The top corporate rate would drop from 35% to 20% next year.
The United States would move to a system that only taxes the domestic income of companies based here, rather than their global income.
Those who report business earnings on personal rather than corporate returns, such as sole proprietors or people in partnerships, would get a new 25% top rate for some of their income.
For the next six years, business expenditures for new equipment could be written off all at once, rather than be amortized over a number of years.
The business deduction for interest on purchases would be sharply curtailed.
The deduction for lobbying local governments would be repealed.
Companies could continue to deduct business-related state and local taxes.