Last week, the Senate passed tax reform (H.R. 1), setting up a conference to produce a united bill with the House. Versions passed by the Senate and the House contain significant differences which must be resolved before final passage.
Proposed business tax changes are listed below, highlighting the differences in the House and Senate version.
- Individual Tax Rates
- House: Four Brackets—12%, 25%, 35% and 39.6%—allows an additional rate for higher income earners
- Senate: Seven Bracket—10%, 12%, 22%, 24%, 32%, 35%, and 38.5%
- Pass-Through Treatment
- House: tax rate for qualified business income 25%. Only 30% of business income is eligible for this rate. Personal services companies are not eligible for this rate.
- Senate: Deduction allows for 23% of qualifying business income, up to $250,000 for single filers or $500,000 for joint filers (expires after 2025)
- Corporate Tax Rate
- House: Permanent reduction to 20% (effective 2018)
- Senate: Permanent reduction to 20% (effective 2019)
- State and Local Taxes (SALT)
- House: Preserves property tax deduction of as much as $10,000
- Senate: Preserves property deduction up to $10,000 (expires after 2025)
- Estate Tax
- House: Doubles the exemption to $11 million for single tax payers and $22 million for married tax payers (repeals in 2025)
- Senate: Doubles the exemption to $11 million for single tax payers and $22 million for married tax payers through 2025 (no repeal)
- Alternative Minimum Tax (AMT)
- House: Repeals the AMT for individual and corporate filers
- Senate: Retains the AMT for individual and corporate filers and raises the individual threshold
- Healthcare Mandate
- House: Maintains the individual mandate requiring the purchase of health insurance
- Senate: Repeals the individual mandate requiring the purchase of health insurance
A Senate and House conference has met to come up with a single bill to send to the president. Republican leaders in the Congress hope to vote on the conference version next week.