Senate Releases Tax Reform Proposal: Tax Cuts and Jobs Act
In the past three weeks both houses of Congress have presented proposals on tax reform. Their goal? To decrease income tax rates for businesses and individuals.
The House of Representatives Ways and Means Committee released a proposal at the beginning of November. This proposal is now moving to the House floor for debate and a hopeful Congress anticipates a vote before the holiday season gets underway.
The Senate Finance Committee released a tax reform proposal titled the Tax Cuts and Jobs Act.
Below are highlights of the Senate proposal:
• 20 percent corporate income tax rate starting in 2019
• Seven individual income tax brackets with a maximum tax rate of 38.5 percent
• A 17.4 percent deduction for the portion of passthrough qualified business income, capping at 50 percent of W-2 wages. The deduction is not available to certain service based businesses unless below a threshold
• Doubling the estate and gift tax exemption
• Repealing the Alternative Minimum Tax (AMT)
• Repealing an individual’s state and local tax deduction when not paid or accrued in carrying on a trade or business
• Repealing mortgage interest deduction for home equity loans, retains $1M limit for acquisition debt
• Keeps the deduction for medical expenses
• 1.4 percent excise tax on endowment income for private colleges with assets of at least $250,000 per student
• Adopting a chained CPI-U inflation measure, a measurement that is generally a slower gauge of inflation
• Expanding the child tax credit to $1,650 per qualified child
• Various proposals including repeal and modification of many current tax laws
The Senate Finance Committee will debate the proposal and make amendments, which are expected to start this week.
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