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| How Could a Tax Change Affect You? This Is What the Senate and House Propose | How Could a Tax Change Affect You? This Is What the Senate and House Propose |
| (about 2 hours later) | |
| On Thursday, Senate Republicans will issue a tax bill. It differs from last week’s House of Representatives bill on a number of important issues. For instance, the Senate plan will completely eliminate the ability to deduct state and local taxes; there is no exception for up to $10,000 in property taxes each year, as there is in the House bill. | On Thursday, Senate Republicans will issue a tax bill. It differs from last week’s House of Representatives bill on a number of important issues. For instance, the Senate plan will completely eliminate the ability to deduct state and local taxes; there is no exception for up to $10,000 in property taxes each year, as there is in the House bill. |
| It’s still too soon to predict what, if anything, will come of all this. In the coming days and weeks, we will see which proposals survive as Congress moves toward possible full votes on these or modified bills. In the meantime, here’s a guide to some of the consumer-facing issues under consideration. | It’s still too soon to predict what, if anything, will come of all this. In the coming days and weeks, we will see which proposals survive as Congress moves toward possible full votes on these or modified bills. In the meantime, here’s a guide to some of the consumer-facing issues under consideration. |
| What’s in place now: | What’s in place now: |
| Seven brackets, with a top rate of 39.6 percent, which people pay on income they earn beyond $480,050 for couples filing their taxes jointly. | Seven brackets, with a top rate of 39.6 percent, which people pay on income they earn beyond $480,050 for couples filing their taxes jointly. |
| What the House proposed: | What the House proposed: |
| Four brackets, with a top rate of 39.6 percent. But that top rate doesn’t begin until a couple hits $1 million in annual income. | Four brackets, with a top rate of 39.6 percent. But that top rate doesn’t begin until a couple hits $1 million in annual income. |
| What the Senate proposed: | What the Senate proposed: |
| Seven brackets, with a top rate of 38.5 percent. The Senate bill’s lowest tax bracket is at 10 percent for individuals, while the House bill had raised it to 12 percent. | Seven brackets, with a top rate of 38.5 percent. The Senate bill’s lowest tax bracket is at 10 percent for individuals, while the House bill had raised it to 12 percent. |
| What’s in place now: | What’s in place now: |
| If you’re single, the current standard deduction is $6,350. Add in exemptions and you’re up to $10,400. | If you’re single, the current standard deduction is $6,350. Add in exemptions and you’re up to $10,400. |
| Married without children? That’s $12,700 for the deduction and $20,700 with exemptions. | Married without children? That’s $12,700 for the deduction and $20,700 with exemptions. |
| If you’re married with two kids, the deduction-plus-exemptions figure goes up to $28,700. There is also a $1,000 tax credit per child. | If you’re married with two kids, the deduction-plus-exemptions figure goes up to $28,700. There is also a $1,000 tax credit per child. |
| What the House proposed: | What the House proposed: |
| The House bill calls for simplification: If you’re single with no children, your standard deduction would be $12,000. If you’re married, it would be $24,000 no matter how many kids you have. The child tax credit, however, would rise to $1,600 per child. There is also another $300 credit for each parent and nonchild dependent, though that would expire after 2022. | The House bill calls for simplification: If you’re single with no children, your standard deduction would be $12,000. If you’re married, it would be $24,000 no matter how many kids you have. The child tax credit, however, would rise to $1,600 per child. There is also another $300 credit for each parent and nonchild dependent, though that would expire after 2022. |
| What the Senate proposed: | What the Senate proposed: |
| The same $12,000/$24,000 standard deductions as the House. Single parents would see their deductions go to $18,000 from $9,300. The child tax credit would rise to $1,650. | The same $12,000/$24,000 standard deductions as the House. Single parents would see their deductions go to $18,000 from $9,300. The child tax credit would rise to $1,650. |
| What’s in place now: | What’s in place now: |
| You can generally deduct the amount you pay for state and local tax income taxes, including property taxes, on your federal income tax return. You can also deduct the interest you pay each year on mortgage debt up to $1 million, a cap that can cover multiple homes. Plus, you can generally deduct up to $100,000 in interest you pay on a home-equity loan or line of credit. | You can generally deduct the amount you pay for state and local tax income taxes, including property taxes, on your federal income tax return. You can also deduct the interest you pay each year on mortgage debt up to $1 million, a cap that can cover multiple homes. Plus, you can generally deduct up to $100,000 in interest you pay on a home-equity loan or line of credit. |
| What the House proposed: | What the House proposed: |
| No more state and local tax deductions, though you could continue to deduct up to $10,000 each year in interest you pay toward your home mortgage. For people buying in the future (which the bill defines as Nov. 2, 2017, or later), mortgage interest deductions would be allowed only on loans up to $500,000. Moreover, only debt from primary residences would count toward that limit, and you could not include any interest from home equity loans or lines of credit that you took out on that new home. | No more state and local tax deductions, though you could continue to deduct up to $10,000 each year in interest you pay toward your home mortgage. For people buying in the future (which the bill defines as Nov. 2, 2017, or later), mortgage interest deductions would be allowed only on loans up to $500,000. Moreover, only debt from primary residences would count toward that limit, and you could not include any interest from home equity loans or lines of credit that you took out on that new home. |
| What the Senate proposed: | What the Senate proposed: |
| No more state and local tax deductions and no exception for property taxes, either. The mortgage interest deduction, however, would survive in its current form. | No more state and local tax deductions and no exception for property taxes, either. The mortgage interest deduction, however, would survive in its current form. |
| What’s in place now: | What’s in place now: |
| For the moment, you can deduct out-of-pocket medical expenses that exceed 10 percent of your adjusted gross income (but not the expenses that amount to the first 10 percent). This is particularly useful for elderly people and others with lower incomes who need regular assistance and care. | For the moment, you can deduct out-of-pocket medical expenses that exceed 10 percent of your adjusted gross income (but not the expenses that amount to the first 10 percent). This is particularly useful for elderly people and others with lower incomes who need regular assistance and care. |
| What the House proposed: | What the House proposed: |
| The House wants to do away with the deduction in 2018. | The House wants to do away with the deduction in 2018. |
| What the Senate proposed: | What the Senate proposed: |
| The Senate would keep the deduction. | The Senate would keep the deduction. |
| What’s in place now: | What’s in place now: |
| Currently, people with incomes below certain thresholds can deduct up to $2,500 of student loan interest each year. | Currently, people with incomes below certain thresholds can deduct up to $2,500 of student loan interest each year. |
| What the House proposed: | What the House proposed: |
| The House wants to do away with the student loan interest deduction. | The House wants to do away with the student loan interest deduction. |
| What the Senate proposed: | What the Senate proposed: |
| The Senate would keep things as they are now. | The Senate would keep things as they are now. |
| What’s in place now: | What’s in place now: |
| In general, you pay taxes on inherited property at a 40 percent rate, but current rules waive that tax for estates up to $5,490,000. | In general, you pay taxes on inherited property at a 40 percent rate, but current rules waive that tax for estates up to $5,490,000. |
| What the House proposed: | What the House proposed: |
| The House seeks to nearly double that exemption to $10 million and repeal it altogether after 2023 — a year later than the House first proposed. | |
| What the Senate proposed: | What the Senate proposed: |
| The Senate wishes to double the exemption but has not proposed any full repeal. | The Senate wishes to double the exemption but has not proposed any full repeal. |
| What’s in place now: | What’s in place now: |
| In 2017, when an employer pays for up to $13,570 in qualified adoption expenses for an employee, the employee pays no taxes on that assistance. There’s also a separate adoption credit, which generally provides taxpayers with a credit of up to $13,570 per eligible child. Under the current rules, the credit phases out for taxpayers with adjusted gross income between $203,540 and $243,540. | In 2017, when an employer pays for up to $13,570 in qualified adoption expenses for an employee, the employee pays no taxes on that assistance. There’s also a separate adoption credit, which generally provides taxpayers with a credit of up to $13,570 per eligible child. Under the current rules, the credit phases out for taxpayers with adjusted gross income between $203,540 and $243,540. |
| What the House proposed: | What the House proposed: |
| The bill had proposed getting rid of the adoption credit altogether, but on Thursday afternoon, the Republican leadership changed its mind and left it intact. | The bill had proposed getting rid of the adoption credit altogether, but on Thursday afternoon, the Republican leadership changed its mind and left it intact. |
| What the Senate proposed: | What the Senate proposed: |
| The Senate would keep things as they are now. | The Senate would keep things as they are now. |