Comparison of the House and Senates Tax Cuts and Jobs Act
The below comparison outlines the “Tax Cuts and Jobs Act” passed by the House of Representatives on November 16 and the Senate on December 2. Since the two plans differ, they will now be sent to a conference committee where negotiators from both chambers will create a unified bill. After, both parties must approve the bill before it is sent to the president for his signature. If you have any questions or concerns about the proposed tax reform and how it may affect you, please call our office at 410-497-5947.
One of the biggest wins appears to be for married individuals. Both the Senate and the House bills have drastically increased the size of the tax brackets for married filing joint status — effectively eliminating the “marriage penalty”. Most married taxpayers who file jointly should see a significant reduction in taxes. Too illustrate the change: In 2017 the top tax bracket of 39.6% kicks in when taxable income exceeds $418,400 for single taxpayers and $470,700 for married couples. In both new bills – the top tax bracket kicks in for single taxpayers when taxable income exceeds $500,000 and for married taxpayers at $1,000,000. Many married taxpayers will now see larger percentages of their income taxed at much lower rates.
Here is a detailed look at how the Senate and House versions of tax reform compare.
| Provision | House Bill | Senate Bill |
|---|---|---|
| 1.`Tax Brackets | Individual Income Tax Rates Four tax brackets: 12%, 25%, 35%, and 39.6%.Married Filing Jointly:12% (Taxable income not over $90,000)25% (Over $90,000 but not over $260,000)35% (Over $260,000 but not over $1,000,000)39.6% (Over $1,000,000)Married Filing Separately:12% (Taxable income not over $45,000)25% (Over $45,000 but not over $130,000)35% (Over $130,000 but not over $500,00)39.6% (Over $500,000)Head of Household:12% (Taxable income not over $67,500)25% (Over $67,500 but not over $200,000)35% (Over $200,000 but not over $500,000) 39.6% (Over $500,000) Other Individuals:12% (Taxable income not over $45,000)25% (Over $45,000 but not over $200,000)35% (Over $200,000 but not over $500,000)39.6% (Over $500,000) The income levels would be indexed for inflation using the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). | Individual Income Tax Rates Seven tax brackets: 10%,12%, 22%, 24%, 32%, 35%, and 38.5%. Married Filing Jointly:10% (Taxable income not over $19,050)12% (Over $19,050 but not over $77,400)22% (Over $77,400 but not over $140,000)24% (Over $140,000 but not over $320,000)32% (Over $320,000 but not over $400,000)35% (Over $400,000 but not over $1,000,000)38.5% (Over $1,000,000)Married Filing Separately:10% (Taxable income not over $9,525)12% (Over $9,525 but not over $38,700)22% (Over $38,700 but not over $70,000)24% (Over $70,000 but not over $160,000)32% (Over $160,000 but not over $200,000)35% (Over $200,000 but not over $500,000)38.5% (Over $500,000)Head of Household:10% (Taxable income not over $13,600)12% (Over $13,600 but not over $51,800)22% (Over $51,800 but not over $70,000)24% (Over $70,000 but not over $160,000)32% (Over $160,000 but not over $200,000)35% (Over $200,000 but not over $500,000)38.5% (Over $500,000) Single Individuals:10% (Taxable income not over $9,525)12% (Over $9,525 but not over $38,700)22% (Over $38,700 but not over $70,000)24% (Over $70,000 but not over $160,000)32% (Over $160,000 but not over $200,000)35% (Over $200,000 but not over $500,000)38.5% (Over $500,000)The income threshold amounts for each rate bracket would be indexed for inflation using CCPI-U. |
| 2.Personal and Dependency Exemptions | Repeal effective for tax years beginning after December 31, 2017. | Repeal effective for tax years beginning after December 31, 2017. |
| 3.Standard Deductions | -Single: $12,200-Married: $24,400-Head of Household: $18,300 Effective for tax years beginning after 2017. The bill would also provide that these amounts be indexed for inflation for years beginning after 2019. | -Single: $12,000-Married: $24,000-Head of Household: $18,000 These increased amounts would expire after 2025. Effective for tax years beginning after 2017. The bill would also provide that these amounts be indexed for inflation for years beginning after 2018. |
| 4.Earned Income Tax Credit | Retain | Retain |
| 5.State & Local Income Taxes | Repeal | Repeal. Reinstate after 2025 |
| 6.Real Estate Taxes | Limit deductions to $10,000 | Limit to $10,000 for married joint and $5,000 for single |
| 7.Mortgage Interest Deduction | Limits mortgage interest deduction to the first $500,000 of debt incurred after November 2, 2017. Only applicable for taxpayer’s principal residence. | Retain; eliminates deduction on Home Equity Debt. |
| 8.Casualty Losses | Repeal except for Presidentially Declared Disaster Area Losses | Repeal except for Presidentially Declared Disaster Area Losses |
| 9.Charitable Contributions | Retain | Retain, with some modifications. Increase the AGI limitation on cash contributions from 50% to 60%, effective for years after 2017 and before 2026. |
| 10.Charitable Contribution Mileage Deduction | No change | Index to inflation |
| 11.Tax Return Reparation Fee Deduction | Repeal | Repeal |
| 12.Miscellaneous ‑ Itemized Deductions Subject to the 2% AGI test | Repeal | Repeal |
| 13.Phase‑out of the overall Itemized Deduction Amount (PEASE Provision) | Repeal | Temporarily repealed, reinstate in 2024. |
| 14.Alternative Minimum Tax (AMT) Individuals | Repeal starting 2017. | Retain but increase the exemption amounts |
| 15. Retirement Plan Contributions (IRA, §401(k), §403(b), §457(b) | Retain | Retain |
| 16.Credit for Social Security Taxes Paid on Restaurant Tips | Credit for portion of employer social security taxes paid with respect to restaurant employee tips would be modified to reflect current minimum wage. Restaurants with 10 or fewer employees would now be required to report tip allocations. Applicable beginning after December 31, 2017. | Not addressed |
| 17.Child Tax Credit | Increase credit to $1,600 per qualifying child under age 18, with the phaseout for couples filing jointly starting at $230,000. Dependent exemption replaced with a $300 per-person tax credit for those dependents not eligible for the child tax credit. | Increase credit to $2,000 per qualifying child under age 18, with the phaseout for couples filing jointly starting at $500,000. Dependent exemption eliminated and a replaced with a $500 for dependents not eligible for the child tax credit. |
| 18.Long‑Term Capital Gain and Qualified Dividends Preferential rates of 0%, 15%, 20% | Retain | Retain |
| 19.Indexing of Provisions | Change from CPI to “chained CPI” which is a slower rate of indexing | Change from CPI to “chained CPI” |
| 20.Adoption Credit | No Change | No Change |
| 21.Exclusion for Adoptions Assistance Programs | Repeal the exclusion for adoption assistance programs effective after December 31, 2017 | Not addressed |
| 22.Affordable Care Act Taxes: Net Investment | Retain | Retain |
| 23.Educator Deduction for Classroom Expenses and Professional Developmental Cost | Repeal | Deduction increased from $250 to $500 |
| 24.Child Care and Dependent Care Credit | Retain | Retain |
| 25.Alimony | Alimony payments would no longer be deductible by the payor or taxable to the recipient. Effective for agreements entered into or modified after 2017. | Retain |
| 26. Student Loan Interest Deduction | Repeal | Retain |
| 27. Education Credits | Consolidate American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC) into one Credit eliminating the Lifetime Learning Credit | No change |
| 28.IRA Contributions | Repeal the allowance for recharacterizing traditional IRAs to Roth IRAs and recharacterization of Roth IRA to traditional IRAs | Retain |
| 29.Roth Conversions | Repeal | Retain |
| 30.Allowance of Meals for Convenience of the Employer | Retain | Repeal effective for tax years beginning after December 31, 2025 |
| 31.Corporate Tax Rates | Impose a flat rate of 20% effective January 1, 2018; corporate AMT repealed | Flat rate of 20% effective January 1, 2019; corporate AMT retained |
| 32.§179 Expense Deduction Election Amounts | Increase current $500,000 amount indexed to inflation, to $5 million with the phase‑out amount increased from $2 million indexed to inflation to $20 million, for tax years beginning after December 31, 2017 and ending before January 1, 2023 | Increase current $500,000 to $1.5 million with the phase‑out beginning at $2.5 million for all tax years beginning after December 31, 2017 and permanent |
| 33.Expansion of Cash Basis Accounting Method | Increased from current $10 million gross receipts test to a $25 million gross receipts test | Increase to a $15 million gross receipts test. |
| 34.Fringe Benefits Business Entertainment Deduction (Amusement or recreation) | Repeal the costs associated with entertainment retain 50% food and beverage | Repeal the costs associated with entertainment retain 50% food and beverage |
| 35.§199 Domestic Income Production Activity Deduction | Repeal for tax years beginning after December 31, 2017 | Repeal for tax years beginning after December 31, 2018 |
| 36.Work Opportunity Credit | Repeal | Not addressed |
| 37.Bonus Depreciation Immediate Expressing of Qualified Property | Allow an unlimited Deduction for 5 years for all tangible and intangible property after September 27, 2017 and before January 1, 2023 | Allow an unlimited Deduction for 5 years for all tangible and intangible property after September 27, 2017 and before January 1, 2023. For assets placed in services after September 27, 2017 and before January 1, 2018, 50% bonus can be elected |
| 38.Net Operating Losses (NOL) for both individuals and businesses | Limit deduction to 90% of the NOL amount with a repeal of the 2 year carry back requirements except for farmers and casualties and allow a one year carry back only • Repeal the 20 year carry forward limitation, therefore unlimited carryforward period allowed effective for tax years beginning after December 31, 2017 | Limit the deduction to 90% of the NOL amount for tax years beginning after December 31, 2017 and 80% for tax years beginning after January 31, 2022. Repeal of the 2 year carryback period except for farmers for years beginning after 2023. Repeal the 20 year carry forward limitation, therefore unlimited carryforward period allowed effective for tax years beginning after December 31, 2017 |
| 39.Estate Tax | Doubles the estate tax exemption with repeal for deaths after December 31, 2017 | Doubles the estate tax exemption for deaths after December 31, 2017 through 2015 |
| 40.Net Business Interest Deduction | Limitation to 30% of adjusted taxable income for business with gross receipts greater than $25 million | Same limitation as House Bill but less than $15 million of gross receipts during 3 prior years |
| 41. §1031 Like‑Kind Exchanges | Repealed except for Real Estate Transaction Exchanges | Repealed except for Real Estate Transaction Exchanges |
| 42. Pass-through Income Treatment | Qualifying businesses would be taxed at a maximum rate of 25% on a portion of pass-through entity net income distributions treated as business income. The remaining portion of distributions would be treated as wage income subject to individual income tax rates. A 9% tax rate would be applicable for certain qualifying business subject to regulations. | Adopts a 23% deduction for pass-through income, generally limited to 50% of wage income, for qualifying businesses. Expires in 2025. |
| 43. Charitable Contributions Substantiation Rules for Contributions of ≥ $250 per single Contribution | Retain | Repeal |
| 44. §121 Exclusion for Gain on Sale of Principal Residence | Change the 2 out of 5 year rule for ownership and use to 5 out of 8 years. Limit the exclusion to once every 5 years from once every 2 years | Change the 2 out of 5 year rule for ownership and use to 5 out of 8 years. Limit the exclusion to once every 5 years from once every 2 years. Allows current exclusion amounts for written binding contracts in effect prior to January 1, 2018. Retains partial exclusion for unforeseen circumstances |
| 45. Gambling Losses | All gambling-related expenses (including losses) would only be deductible to the extent of gambling winnings. | All gambling-related expenses (including losses) would only be deductible to the extent of gambling winnings. |
| 46. Private Activity Bond Interest Income | Repeals the ability to issue private activity bonds on a tax exempt basis | No Mention |
| 47. Tax Exempt Bonds for Professional Stadiums | Repeal Tax Exempt interest income on these bonds | No Mention |
| 48. Mandate of Minimum Essential Coverage (MEC) for individuals and families and Applicable Large Employers (ALE) that fail to Offer Coverage to Full Time Employees | Retain | Repeal after 2018 |
| 49. Moving Expense Deduction | Eliminate except for members of the armed forces | Eliminate except for members of the armed forces |
| 50. Conversion of a Traditional IRA to Roth IRA | Repeal | Retain |
| 52. Rollover Period for the Rollover of Qualified Plan Loan Offset Amounts | No change proposed | Increase the 60 day rollover contribution period from 60 days to the due date for filing the income tax return |
| 53. Student Loan Debt Discharge | No mention | Certain student loans that are discharged on account of the death or total and permanent disability of the student would be excluded from gross income |
| 54. Simplified Filing for Older Taxpayer | Not mentioned. | Require IRS to provide a simplified income tax return as Form 1040SR for persons who are age 65 and older effective for tax years beginning after January 31, 2018. |
| 55. §529 Plans for Unborn Child | No provision proposed | An unborn child would be able to qualify as a designated beneficiary effective for contributions made after December 31, 2017 and before January 1, 2026 |
| 56. Deferred Foreign Profits | Deemed repatriation of currently defined foreign profit of a rate of 12% for cash and cash equivalents profits and at 5% of all other profits | Deemed repatriation of currently defined foreign profit of a rate of 12% for cash and cash equivalents profits and at 5% of all other profits |
| 57. Creation of a Territorial Tax System | Exempts from U.S. Tax 100% of dividends of any foreign subsidiary | Exempts from U.S. Tax 100% of dividends of any foreign subsidiary |
| 58. Kiddie Tax | No proposed change | Unearned income would be taxed using the income tax rates and brackets applicable to Trusts and Estates. Earned income would continue to be taxed using the single taxpayer rates and brackets. Applicable to children ages 18 and under, or under age 24 if a full time student. |
| 59. Due Diligence Requirement for Head of Household Filing Status | No proposed change | Impose a due diligence requirement for paid tax preparers in determining the eligibility for a taxpayer to file with a status of Head of Household. |
| 60. Dividends Received Deductions for C-Corporations | Reduce the current 70% dividends received deduction to 50% and the current 80% dividends received deduction to 65% | No proposed change |
| 61. §179 Property to Include Certain Real Estate Property | No proposed change | Expand the definition of “qualified real property” to include improvements to nonresidential real property placed in service after the date such property is placed in service and will include:• Roofs• Heating• Ventilation and Air Conditioning System• Fire Protection• Alarm System• Security Systems for Tax Years after December 31, 2017 |
| 62. Inventory Accounting Rules | No proposed change | Exempt Certain taxpayers from the requirements to keep inventory if gross receipts test of $15 million is met |
| 63. Bonus Depreciation for Luxury Auto under §280F | No proposed change | Increase first year depreciation to $8,000 for autos placed in service after December 31, 2017 |
| 64. Depreciation for Luxury Autos if Bonus Depreciation not claimed | No proposed change | • $10,000 year one • $16,000 year two • $9,600 year three • $5,760 year four and all subsequent years |
| 65. Recovery Period for Residential and Nonresidential Real Property | No proposed change | Shorten the recovery period for determining the depreciation deduction with respect to rental real estate to 25 years for property placed in service after December 31, 2017 |
| 66. Corporate Alternative Minimum Tax (AMT) | Repeal | Retain |
| 67. Carried Interest | Retain | Impose a 3 year holding period for certain partnership interests received in connection with the performance of services to be taxed as long term capital gain rather than ordinary income |
| 68. Qualified Transportation Fringe Benefits | Retain | Repeal |
| 69. Employee Achievement Awards | Retain | Repeal Reduction |
| 70. Credit for Employee Paid Family Leave | No Proposal | 12.5% credit of wages paid if rate of pay is 50% of wages normally paid |
| 71. Whistleblower Awards | Not addressed | Provide an above-the-line deduction for attorney fees and court costs paid by, or on behalf of, a taxpayer in connection with any action involving a claim under state false or fraudulent claims acts, the SEC Whistleblower program, and the Commodity Futures Trading Commission whistleblower program. For awards under §21F of the Securities and Exchange Act of 1934, awards under state false or fraudulent claims acts, and awards under §23 of the Commodity Exchange Act, the deduction would not be allowed in tax years beginning after December 31, 2025. Effective for tax years beginning after December 31, 2017. |
| 72. IRS Whistleblower Program | Not addressed | Modify the definition of collected proceeds eligible for awards to include: (1) penalties, interest, additions to tax, and additional amounts provided under the internal revenue laws, and (2) any proceeds under enforcement programs that the Treasury has delegated to the IRS the authority to administer, enforce, or investigate, including criminal fines and civil forfeitures, and violations of reporting Requirements. The modified definition would also be used to determine eligibility for the enhanced reward program under which proceeds and additional amounts in dispute exceed $2 million. Collected proceeds amounts would be determined without regard to whether such proceeds are available to the IRS. Effective for information provided before, on, or after the date of enactment for which a final determination for an award has not been made before that date. |
| 73. Estate and Gift Taxes | Increase the federal estate and gift tax unified credit basic exclusion amount to $10 million, with inflation adjustments, effective for decedents dying and gifts made after 2017. The bill would repeal the federal estate tax, effective after 2024. The federal gift tax rates would also be decreased from 40% to 35%, effective for gifts made after 2024. | The bill would increase the federal estate and gift tax unified credit basic exclusion amount to $10 million, with inflation adjustments, effective for decedents dying and gifts made after 2017 and before 2026. |
| 74. Refundable Credit Program Integrity | In order to claim a Child Tax Credit or the American Opportunity Tax Credit, taxpayers would be required to provide a word-eligible SSN. The IRS would be granted math error authority to adjust the returns of taxpayers failing to provide this. | In order to claim the Child Tax Credit, taxpayers must provide the social security number of each qualifying child. |
| 75. Tax Preparation Services Deduction | The bill would eliminate the itemized deduction for tax preparation services for tax years beginning after 2017. | Not addressed |
| 76. Alternative Minimum Tax | Repeal | Amend; exemption amount increases slightly. |
| 77. International Income | Moves to a territorial system with base-erosion rules including the inclusion of 50 percent of excess returns by controlled foreign corporations in U.S. shareholder’s’ income, and an excise tax on payments made to foreign firms unless claimed as effectively connected income | Moves to a territorial system with anti-abuse rules and a base erosion minimum tax of the excess of 10 percent of modified taxable income over an amount equal to regular tax liability |
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