CONTINUING EDUCATION FOR TAX & FINANCIAL PROFESSIONALS

Tax Reform Bill Introduced Nov 9, 2017 November 10, 2017

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 proposalsHouse(HR 1 as amended)Senate (“conceptual mark”)
Individual tax rates12%, 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.
ExemptionsRepealsSame
Child tax creditIncreases to $1,600 for children under 17 and adds $300 for taxpayers and other dependents—phase out increased to begin at $115,000 MFJIncreases to $1,650 for children under 18 and adds $500 for other dependents—phase out increased to begin at $1m MFJ
Standard deductionIncreases 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 deductionRepealsAllows excess over 10% of AGI
State and local taxesRepeals except allows up to $10,000 in real estate taxes.Repeals all individual state and local taxes.
Mortgage interestDrops acquisition debt from $1m to $500k for one principal residence.Leaves acquisition debt at $1m but repeals equity borrowing.
Charitable contributionsIncreases the 50% AGI limitation on cash contributions to public charities and certain private foundations to 60%.Same
Misc. itemized deductionsRepeals employee business expenses, tax prep fees, and personal casualty losses— retains presidentially declared casualty lossesRepeals all misc. itemized deductions that are subject to the 2% of AGI limitation—retains presidentially declared casualty losses
Phase out of itemized deductionsRepeals the phase out of itemized deductionsSame
AMTRepealsSame
Adoption creditAmended to retainRetains
Sec 121 home sale exclusionFor 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 deductionRepeals except for militarySame
Alimony deductionRepeals 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 taxesDoubles exemption and repeals after 2023.Doubles exemption but does not repeal.

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