Comparing House and Senate GOP Tax Reform Plans For Trump Tax Changes in 2018 and 2019

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House and Senate Republican (GOP) lawmakers have released their proposals for President Trumps Tax Reform measures under the Tax Cuts and Jobs Act. These proposals are aimed at building on Trump’s promises to streamline the US personal and corporate tax code. The plans promise tax savings in 2018 of nearly $1,200 to $1,700 for an average four person household. However most critics have said that the proposed Trump/GOP tax reforms will benefit the rich and large corporations far more than lower and middle-class families.


Because the GOP only has a slim 2 seat majority in Senate many expect a viable tax bill to more closely resemble the more moderate Senate bill. Senate lawmakers also must grapple with strict rules and special Senate procedures that limit the bill to not add more than $1.5 trillion to the debt over 10 years. Otherwise they will face a filibuster from Democrats.

The Senate bill will have to reconciled with the House bill, before being sent to President Trump for approval.  Via the table below I am looking to contrast the changes by key categories across the GOP and final tax reform bill.

CategoryHouse Republicans ProposalSenate Republicans ProposalReconciled/Final Bill for Trump
Tax Brackets & RatesGo from seven to four tax rates and brackets: 12%, 25%, 35% and 39.6%. For single filers, corresponding income brackets will be up to $45,000, $200,000, $500,000 and $500,000+. For married people, those brackets will be up to $90,000, up to $260,000, up to $1 million and over $1 million. The head of household status will be repealed. Bill also includes a 6% surtax or "bubble rate" that applies to those with AGI over $1 million ($1.2 million for couples)
Keeps seven individual income tax brackets per current tax model (vs 4 in House tax plan), but the 12% bracket would replace 15% bracket. Top rate cut to 38.5% vs 39.6% currently in place. Individual tax cuts would sunset after 2025(Due by end of the year)
Standard Deduction and Personal ExemptionNearly double standard deductions to $24,000/$12,000 (married/single filers). ; Elimination of personal exemptionSame approach as house to nearly double standard deduction thresholds. Single parents would get a $18,000 standard deduction. Personal exemption eliminated. These would only be in place till 2025, after which these deductions and exemptions would return to current levels
Child Tax Credit (CTC)Raise to $1,600 from current $1,000. Increases income thresholds ($115,000/$230,000) for the CTC eligibility to allow more families to claim the credit. Add a new $300 family tax credit for each parent and non-child dependent.Increase CTC to $2,000. This is much higher than House tax plan bill. Offers a $300 per year “flexibility credit,” equivalent to the family tax credit
Eliminated Itemized Credits and DeductionsState & local income and sales taxes (SALT) deduction, Medical & long-term care expenses, Moving expenses, Alimony payments, Tax Preparer fees, Student loan interest and Teacher classroom expensesSenate plan also eliminate federal deductions for state and local taxes (SALT). Cuts to other itemized deductions are TBD
Reduced Itemized Credits and DeductionsReducing the following deductions: Mortgage interest (limit to $500K loans vs current $1M limit), Property taxes (limited to $10,000)Senate plan would keep mortgage interest deduction for loans up to $1,000,000
Kept Itemized Credits and Deductions (current)Keeps Charitable contribution deduction (qualifying categories to be streamlined) and reinstated Adoption tax credit (worth up to $13,750) which was originally cutKeeps child and dependent care credit, Medical & long-term care expenses and education relief for graduate students
Earned Income Tax Credit (EITC) No change and preserved at (current levels)No change to the EITC credit and preserved as is
401(k) Retirement PlansNo Changes or impacts (see 2017 and 2018 plan limits)No changes or impacts to current levels
Estate and Death TaxDouble the estate or death tax exemption to $11 million. This tax would then be fully phased out after six yearsDoubles the exemption for the estate tax but does not eliminate it like House bill proposal
Alternative Minimum Tax (AMT)Eliminated entirelyRepealed in line with House Tax bill, but the repeal would expire after 2025 (for taxes in 2026)
Corporate TaxesPermanently cut the federal corporate tax rate to 20 percent (from 35 percent). Immediate write-off for new equipment and preserves R&D tax creditSame as house and will stay in place permanently. But will delay the tax cut until 2019. Similar to House plan with regard to treatment of new equipment write-off and R&D credit
Small Business TaxesLower the maximum rate to 25% on small business income for pass through like entities (e.g. sole proprietorships, partnerships and S-corporations).

Provides a new small business tax rate of 9 percent for businesses earning less than $75,000 in income. The benefit is phased out as taxable income exceeds $150,000 and fully phased out at $225,000.
Will reduce the burden on pass-through businesses by adding a small business deduction (17.4% deduction of applicable income)
Global & International TaxesRemove double taxing of foreign income, provide a lower one-time repatriation tax rate for returned overseas/offshore corporate funds (Illiquid assets would be taxed at a 7% rate, liquid assets like cash which would be taxed at a 17% rate). Any incentives that promote overseas job creation will be removed to support US job creatorsAlso eliminates global double taxation. Will provide a one time repatriation tax to eliminate “lock-out effect” by making it simpler and less onerous for American multinationals to repatriate bring foreign earnings
Capital GainsNo change to current rulesNo changes to personal CGT. But Senate has now repealed provision that taxed employee stock options when they vested instead of when they were exercised
Social SecurityNo change to tax treatment of SSI incomeNo changes likely
Obamacare PenaltyNo change to current Obamacare penalties (individual mandate) for 2017 or 2018Includes provision to repeal Obamacare’s individual mandate (health care penalty)

The senate bill should be released in the upcoming weeks. Please share this article and connect via Facebook or Twitter to get the latest updates and news related to Trump and GOP tax reform proposals.

{ 6 comments… read them below or add one }

Stanley Roe November 3

Are the changes to the way Social Security income is currently taxed?

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Andy (Author) November 9

Not that is indicated by the bills currently proposed.

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Butch November 3

What about cap gains and preferred dividends?

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Andy (Author) November 9

No changes likely

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oscar November 3

What is standard deduction for single parents? Head of household? Rate on longterm capital gains in the 10 % bracket , and Qualified dividends?

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Gus November 2

Note that the $1600 Child Tax Credit (CTC) is $1000 refundable (just like now), and $600 non-refundable. The latter means that in the 12% tax bracket it is exactly equivalent to a $5000 personal exemption per child. So even though personal exemptions are to be eliminated (while the Standard Deduction is roughly doubled), the personal exemption effectively lives on in the form of this increased Child Tax Credit.So families with kids do just fine with these changes.

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