• Tax reform bill passes House and Senate: What to expect from the new legislation

    By: Debbie Lord, Cox Media Group National Content Desk

    Updated:

    The House and Senate voted Tuesday to pass the largest overhaul of the U.S. tax code in more than 30 years. The bill passed on a 227-203 vote. No Democrats voted for the new legislation.

    In the Senate, the Tax Cuts and Jobs Act passed on a 51-48 vote at 12:40 a.m. ET on Wednesday. President Trump is expected to sign the legislation before Christmas.

    The House will vote again on the bill on Wednesday because of technical issues with the first vote.

    Here are a few takeaways from the new law. 

    • The corporate tax rate has been cut from 35 percent to 21 percent beginning on Jan. 1, 2018.
    • The 20 percent corporate alternative minimum tax has been repealed.
    • The legislation creates a 20 percent deduction for the first $315,000 on pass-throughs, or businesses such as partnerships. The deduction is for qualified business income for joint filers.
    • The law imposes a one-time mandatory tax of 8 percent on illiquid assets, assets not easily converted into cash, and 15.5 percent on cash and cash equivalents for U.S. business profits held overseas. The more than $2 billion held now in overseas banks is a product of a rule that made foreign profits tax-deferred if they are not brought into the United States, or repatriated.  
    • Businesses may now write off the full value of investments in new plant and equipment for five years. Beginning in year six, the 100 percent expensing of a new plant and equipment is eliminated.
    • The bill provides tax credits for producing electricity by using geothermal, solar, municipal waste, hydropower, biomass and wind.
    • For individuals, the current seven tax brackets remain, but income levels and rates have been changed.
    • For homes purchased from Jan.1, 2018 through Dec. 31, 2025, the bill caps the deduction for mortgage interest at $750,000 in home loan value. After Dec. 31, 2025, the cap is $1 million in loan value. The bill also suspends the deduction for interest on home equity loans until 2026.
    • The standard deduction has been increased to $12,000 from $6,350 for individuals, and to $24,000 from $12,700 for married couples filing jointly..
    • The child tax credit has doubled to $2,000 per dependent child under age 17. There is a refundable portion of $1,400.  
    • The personal exemption of $4,050 is eliminated. The personal exemption is a fixed exemption some could take off their adjusted gross income.
    • The exemption for estate and gift taxes is increased to $10 million from $5 million per person.  
    • Beginning in 2019, the new legislation eliminates the Affordable Care Act’s individual mandate. 
    • Families can deduct up to a total of $10,000 in local property and state and local income taxes.
    • Below are the changes in income tax rates for married couples filing jointly and for singles. The changes take effect on Jan. 1, 2018.

    10 percent up to $19,050, versus 10 percent up to $18,650 under existing law;

    12 percent on $19,051 to $77,400, versus 15 percent on$18,651 to $75,900;

    22 percent on $77,401 to $165,000, versus 25 percent on $75,901 to $153,100;

    24 percent on $165,001 to $315,000, versus 28 percent on $153,101 to $233,350;

    32 percent on $315,001 to $400,000, versus 33 percent on $233,351 to $416,700;

    35 percent on $400,001 to $600,000, versus 35 percent on $416,701 to $470,700

    37 percent above $600,000, versus 39.6 percent above$470,700.

    For single individuals, effective Jan. 1, 2018 and ending in 2026, income tax would be:

    10 percent up to $9,525, versus 10 percent up to $9,325 under existing law;

    12 percent from $9,526 to $38,700, versus 15 percent on $9,326 to $37,950;

    22 percent on $38,701 to $82,500, versus 25 percent on $37,951 to $91,900;

    24 percent on $82,501 to $157,500, versus 28 percent on $91,901 to $191,650;

    32 percent on $157,501 to $200,000, versus 33 percent on $191,651 to $416,700;

    35 percent on $200,001 to $500,000, versus 35 percent on $416,701 to $418,400;

    37 percent above $500,000, versus 39.6 percent above $418,400.

    These brackets would expire after 2025.

    • The bill also allows drilling in Alaska’s Arctic National Wildlife Refuge. 

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