On November 9, 2017, the Senate Committee on Finance introduced the Chairman’s “conceptual mark” of its tax reform plan, and the House Ways and Means Committee voted (along strict party lines) to approve its amended Tax Cut and Jobs Act.

The plans differ in many ways. There will be many changes before we see final legislation making its way to the President’s desk as donors, lobbyists, and constituents weigh in. Here is a comparison chart that briefly summarizes the major proposals affecting our individual client.

 

Individual proposals

House

(HR 1 as amended)

Senate (“conceptual mark”)

Individual tax rates

12%, 25%, 35%, and 39.6%.
Imposes highest rate at $1m
MFJ and $500k single and HOH.

10%, 12%, 22.5%, 25%, 32.5%, 35%, and 38.5%.
Imposes highest rate at $1m
MFJ and $500k single and HOH.

Exemptions

Repeals

Same

Child tax credit

Increases to $1,600 for children under 17 and adds $300 for taxpayers and other dependents—phase out increased to begin at $115,000 MFJ

Increases to $1,650 for children under 18 and adds $500 for other dependents—phase out increased to begin at $1m MFJ

Standard deduction

Increases standard deduction to $12,000 single and $24,000 MFJ—repeals additional amounts for elderly and blind. Indexed for inflation after 2017.

Same—except retains additional amounts for elderly and blind. Indexed for inflation after 2018.

Medical deduction

Repeals

Allows excess over 10% of AGI

State and local taxes

Repeals except allows up to $10,000 in real estate taxes.

Repeals all individual state and local taxes.

Mortgage interest

Drops acquisition debt from $1m to $500k for one principal residence.

Leaves acquisition debt at $1m but repeals equity borrowing.

Charitable contributions

Increases the 50% AGI limitation on cash contributions to public charities and certain private foundations to 60%.

Same

Misc. itemized deductions

Repeals employee business expenses, tax prep fees, and personal casualty losses— retains presidentially declared casualty losses

Repeals all misc. itemized deductions that are subject to the 2% of AGI limitation—retains presidentially declared casualty losses

Phase out of itemized deductions

Repeals the phase out of itemized deductions

Same

AMT

Repeals

Same

Adoption credit

Amended to retain

Retains

Sec 121 home sale exclusion

For sales and exchanges after Dec. 31, 2017, §121 exclusion of gain on the sale of a personal residence would be modified to require that the home be owned and used for 5 of the last 8 years. Section 121 would be modified to phase out the exclusion based on AGI above $250,000 ($500, 000 MFJ). 

For sales and exchanges after Dec. 31, 2017  §121 exclusion of gain on the sale of a personal residence would be modified to require that the home be owned and used for 5 of the last 8 years. Phase out not included.

Moving expense deduction

Repeals except for military

Same

Alimony deduction

Repeals the alimony paid deduction for agreements executed after Dec. 31, 2017. There would be a corresponding repeal of the provisions providing inclusion of alimony in gross income. 

No provision

Estate taxes

Doubles exemption and repeals after 2023.

Doubles exemption but does not repeal.

 


 ©2017 Sharon Kreider