By: Brent Sailhamer, Director of Government Affairs
Despite stumbles throughout the year, Congress looks set to deliver on one of President Donald Trump’s biggest campaign promises – a significant overhaul of the tax code.
In mainly party line votes, both the Republican-controlled House of Representatives and Senate approved the agreed-to measure after offering slightly differing counter proposals earlier this year. The Senate approved the bill by a 51-48 vote, with the House voting twice after a procedural error, finally approving the measure by a 224-201 vote. Despite heavy opposition from Democrats that the legislation unfairly offers benefits to America’s highest earners, independent reviews show a broad offering of tax relief to working class families. The bill also makes the American taxation system more succinct by:
- Eliminating the penalty under the Affordable Care Act for failing to have health insurance.
- Lowering the corporate tax rate from 35 percent to 21 percent.
- Reducing top effective marginal tax rate for S corporations to a top rate of 29.6 percent, allowing for a 20 percent tax deduction that applies to the first $315,000 of joint income earned by all S-corporations.
- Eliminating corporate Alternative Minimum Tax (AMT); increasing the exemption amount from the AMT for individuals.
- Continuing to exempt the value of tuition waivers from taxes.
- Increasing the refundable portion of the child tax credit to $1,400; the overall child tax credit will increase from $1,000 to $2,000.
- Roughly doubling the standard deduction, from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for married couples filing jointly
- Preserving the child adoption tax credit.
- Allowing filers to write off the cost of state and local taxes, but only up to $10,000. Filers must choose from among sales, income and property taxes for the deduction, instead of being able to deduct all local taxes.
- Preserving the mortgage interest deduction for all homeowners with existing mortgages, and for homeowners with new mortgages, the home mortgage interest deduction will be available up to $750,000.
- Preserving the charitable deduction as it is.
The bill now will be delivered to the President, who has indicated that he will sign it.