Highlights of House, Senate GOP plans to overhaul tax code
A comparison of a Republican-written tax bill approved Thursday by the House Ways and Means Committee and another being proposed by GOP members of the Senate Finance Committee:
—Personal income tax rates: House condenses current seven brackets to four: 12, 25, 35 and 39.6 percent. Senate retains seven brackets but changes them to 10, 12, 22.5, 25, 32.5, 35 and 38.5 percent. Under current law, top bracket is 39.6 percent.
—Standard deduction: Is currently $6,350 for individuals and $12,700 for married couples. House, Senate would both raise those levels to $12,000 for individuals and $24,000 for couples.
—Tax credits: House raises per-child tax credit from $1,000 to $1,600, extends it to families earning up to $230,000. Creates a $300 tax credit for each adult in a family, which expires in 2023. Senate raises per child tax credit to $1,650 and raises income limit of families who qualify to $1 million. Both bills preserve adoption tax credit, which House bill initially eliminated.
—Home mortgage interest deduction: House would limit the deduction to the first $500,000 of the loan. Senate would retain the current $1 million ceiling.
—Other deductions: House reduces allowable charitable deductions and eliminates medical expense deductions. Senate does neither.
—State and local taxes: House ends deductions for state and local income and sales taxes, allows it for up to $10,000 in property taxes. Senate eliminates entire deduction.
—Alternative minimum tax: House, Senate both repeal the tax aimed at ensuring that higher-earning people pay at least some tax.
—Inheritance tax: When someone dies, the person inheriting the estate currently must pay taxes on its value above $5.5 million for individuals, $11 million for couples. House bill initially doubles those limits and repeals the entire tax after 2023. Senate doubles the exemptions but does not repeal the tax.
—Individual mandate: Neither chamber repeals the requirement in President Barack Obama’s health care law that people pay a tax penalty if they don’t purchase health insurance.
—Corporate taxes: House, Senate both reduce current 35 percent rate to 20 percent, but Senate has one-year delay in dropping that rate.
—Pass-through businesses: Millions of U.S. businesses “pass through” their income to individuals, who then pay personal income tax on those earnings, not corporate tax. House bill would tax many of them at 25 percent, plus creates 9 percent rate for the first $75,000 in earnings by some smaller pass-throughs. Senate bill would let people deduct some of the earnings and then pay at their personal income tax rate on the remainder.
—Businesses: House, Senate both expand write-offs allowed companies that buy equipment.
—Multinational corporations: House levies 10 percent tax on profits for overseas subsidiaries of U.S. corporations, and seeks to eliminate tax incentives that encourage some U.S. companies to move overseas. Senate ends tax advantages for firms moving overseas.