Highlights of the GOP plan to overhaul the tax code
House Republicans unveiled a $1.5 trillion tax plan that cuts the corporate rate, lowers the personal tax rate of most Americans and eliminates or limits some prized deductions. A look at provisions of the proposal:
__Income tax rates: Sets four new income tax rates: 12 percent, 25 percent, 35 percent and 39.6 percent. The 25 percent rate would start at $90,000 for married couples and $45,000 for individuals; the 35 percent rate would apply to family income exceeding $260,000 and individual income over $200,000, which means many upper-income families whose top rate is currently 33 percent would face higher taxes. The current 39.6 percent top rate would apply to individual income exceeding $500,000 and earnings exceeding $1 million for married couples.
__ Nearly doubles the standard deduction to $12,000 for individuals and $24,000 for couples, which means significantly fewer taxpayers would itemize deductions like mortgage interest.
__Limits the mortgage interest deduction for new home loans to the first $500,000 of the loan, instead of the current $1 million limit. Eliminates the deduction for second homes.
__Eliminates the deduction for state and local income taxes, and caps the deduction for state and local property taxes at $10,000.
__Families: Eliminates personal exemptions of $4,050 for each family member. Repeals itemized deductions for medical expenses, alimony payments for divorces after 2017, moving expenses. Workers would owe taxes on the amount of employee achievement awards, and on employer-provided assistance for adoptions and for caring for children or disabled family members.
—Tax credits: Increases the per-child tax credit from $1,000 to $1,600 and extends it to families earning up to $230,000. There’s also a new $300 tax credit for each adult in a family.
—Business taxes: Cuts the top tax rate for corporations from 35 percent to 20 percent. Lowers to 25 percent the rate for many “pass-through” businesses, whose profits are taxed at the owners’ individual rate, though service businesses such as law firms wouldn’t be eligible.
—Multinational corporations: Establishes a 10 percent tax on profits for overseas subsidiaries of U.S. corporations and seeks to prevent tax gamesmanship that has moved U.S. companies overseas. Permits “repatriation” back to the U.S. of profits stockpiled overseas at a one-time 12 percent rate. Tightens tax rules on U.S. operations of foreign companies.
—Eliminates medical expense deductions, which would affect families dealing with a member living in a nursing home.
—Education: Repeals Hope Scholarship Credit and Lifetime Learning Credit for higher education, repeals tax deduction for interest payments on student loans and the tax exclusion for employer-provided education assistance. Also lets people designate fetuses as beneficiaries of 529 accounts, which are savings programs for college costs.
—401(k) retirement accounts: Makes no change. GOP leaders had discussed reducing this year’s $18,000 contribution cap substantially to raise money for the bill, but the idea drew strong opposition as a blow to middle-class savers and it was abandoned.
—AMT: Repeals the alternative minimum tax, a parallel tax structure aimed at ensuring that all people pay at least some tax. It has been criticized for excessive complexity.
—Estate inheritance tax: Immediately doubles the exemption of large estates from $11.2 million to $22.4 million and repeals the estate tax entirely after six years.
__Sports: Repeals the charitable deduction for money spent for the right to buy tickets to college sports events. Ends the tax exclusion for interest on bonds issued by state and local governments to build professional sports stadiums.
__Eliminates the tax credit small businesses have received for easing physical access to their offices for disabled people.
__Reduces the tax credit for companies for producing electricity from alternative sources like wind and solar energy.