The Trump/GOP tax bill has now passed in both the House and Senate, in different versions. Below are summarized the main commonalities and differences in the two bills, based on information outlined by Kimberly Amadeo.
The Major Commonalities:
The personal exemption is eliminated for individuals.
Most itemized deductions are eliminated as well, with the exception of property taxes, charitable contributions, and mortgage interest.
State and local tax deductions are eliminated under each plan.
The standard deduction is doubled under each plan.
The estate tax exemption is doubled under each plan immediately, with the House bill repealing it completely after 2023.
The maximum corporate tax rate is cut to 20% from 35% in both plans, the House plan beginning next year, the Senate not until 2019.
Both plans allow some depreciable assets to be deducted in a single year instead of amortizing for longer periods.
Both plans end interest deductions on some other items such as school loans and moving expenses.
The Major Differences:
The Senate plan breaks into 7 tax brackets, ranging from 10% to 38.5%. The House plan calls for 4 tax brackets of 12, 25, 35, and 39.6%.
The Senate plan would cap the mortgage interest deduction at $1 million, while the House plan would cap it at $500,000.
The deduction for medical expenses is expanded in the Senate plan and eliminated in the House plan.
The House bill would eliminate the Alternative Minimum Tax while the Senate bill does not.
The Senate bill would end the tax mandated by Obamacare on those who do not purchase insurance.
Foreign companies doing business in the United States would face increased taxes under the Senate plan.
How will these proposed changes affect businesses and individuals? Opinions vary. Each plan would increase the national debt by some 1.5 trillion dollars. Many believe that the stimulation of business caused would offset that increase. Others do not believe this will occur. While there will undoubtedly be changes and reconciliations of these bills in the next month or so, they do seem to be converging in many key aspects, as can be seen by the commonalities they now contain. As always, to appreciate and plan for the possible ramifications of these numerous and complex changes, it is advisable to consult with tax planning professionals such as Foster Financial CPA.
Tax Tips for the Self-Employed
An Overview of the Net Operating Loss Tax Provisions in the CARES Act
How To Decrease Your Small Business Debt? A Step-By-Step Guide
Why Every Small Business Needs a Bookkeeper?
Tax Credits That Could Benefit Small Businesses
Why You Should, and Shouldn’t, Apply for a Tax Extension