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The next step is to resolve differences between the two tax bills, including pass-through tax rates, the mortgage interest deduction, and the estate tax.

Tax strategies

Senate Passes Tax Reform Bill: Here’s a Comparison of Senate and House Proposals

  • Chastity Wilson
  • 12/6/2017

Update: 12/22/17
On December 22, President Trump signed the tax reform bill into law. View our tax reform chart to compare the new law with the current tax law.

Notable differences between the two bills include the proposed individual and pass-through tax rates, limitations on the deductibility of mortgage interest, and repeal of the estate tax. Many of the Senate provisions — including all of the individual tax reform provisions — sunset by the end of 2025 because of a complicated legislative rule that prevents the Senate from passing a reconciliation bill that increases the federal deficit beyond the 10-year budget window.

Below is a side-by-side comparison of key provisions in the House and Senate bills.

Current law House Tax Bill Senate Tax Bill
Personal tax rates Seven tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, 39.6% Four tax brackets: 12%, 25%, 35%, and 39.6%, and a 6% surtax on a portion of income in excess of $1.2 million ($1 million for single filers) Seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, 38.5%
Personal long-term capital gains and qualified dividend tax rates Up to 23.8% Up to 23.8% Up to 23.8%
Maximum pass-through tax rate 39.6% Passive business: maximum 25% plus net investment income tax; Active business: generally 30% of income subject to 25%, and 70% of income subject to 39.6%; Personal service business: maximum 39.6% Ordinary rates with deduction of 23% of qualifying domestic income; limited deduction for income from lower-income service businesses
Maximum corporate tax rate 35% 20% (25% for personal service corporations) 20% effective for years beginning after 2018
Personal standard deduction Married filing jointly: $12,700
Head of household: $9,350
Single: $6,350
Married filing jointly: $24,400
Head of household: $18,300
Single: $12,200
Married filing jointly: $24,000
Head of household: $18,000
Single: $12,000
Child tax credit $1,000 per child $1,600 per child and a $300 credit for taxpayer, spouse, and non-child dependents $2,000 per child; $500 for non-child dependents
Personal exemption $4,050 Repealed Repealed
Medical expenses Deductible to the extent they exceed 10% of AGI Not deductible Deductible to the extent they exceed 10% of AGI (7.5% of AGI for 2017 and 2018)
Depreciation Fixed assets are generally capitalized and depreciated; In some cases, Section 179 immediate expensing of up to $500,000 is available Immediate expensing of most new and used property (excluding structures) through 2022; Section 179 limit increased to $5 million Immediate expensing of most new property (excluding structures); Section 179 limit increased to $1 million
Depreciable life of buildings 39 years for most non-residential buildings; 27.5 years for residential rentals 39 years for most non-residential buildings; 27.5 years for residential rentals 25 years
Mortgage interest Deductible on up to $1.1 million of debt; interest on second home deductible Deductible on up to $500,000 of debt; no second home or home equity interest Deductible on up to $1.0 million of debt (including interest on debt to acquire a second home); no home equity interest deduction
Personal state income, sales tax, and property tax Allowable as an itemized deduction Property tax capped at $10,000; income and sales tax deduction repealed Same as House plan except unlimited carryover
Individual Alternative Minimum Tax (AMT) Imposed when minimum tax exceeds regular income tax Repealed after 2017; AMT credits refundable from 2019 through 2022 Increases AMT exemption amounts and phase-out
Business interest Generally deductible Generally limited to extent interest exceeds 30% of income; unlimited for small business Same as House plan except unlimited carryover
Cash method of accounting Generally limited to business with less than $1 million, $5 million, or $10 million in receipts depending on facts Expanded to include businesses with less than $25 million in receipts Expanded to include businesses with less than $15 million in receipts
Domestic production activities deduction Domestic producers eligible for a deduction equal to 9% of their qualifying income Repealed after 2017 Repealed after 2017 (2018 in the case of C corporations)
Corporate AMT 20% corporate AMT Repealed after 2017; AMT credits refundable from 2019 through 2022 Retains current law
Net operating losses (NOL) Generally carried back 2 years and forward 20 years Carryback repealed except farms (one year); carryover deduction limited to 90% of pre-net operating loss income Carryback repealed except farms (two years), carryover deduction limited to 90% of pre-net operating loss income
Gift and estate tax Tax of up to 40% imposed on gifts and estates, subject to a $5.49 million lifetime exemption per spouse Lifetime exemption doubled; estate tax repealed after 2024; gift tax remains in effect with 35% rate in 2024; step-up continues Lifetime exemption doubled; estate tax remains in effect

A conference committee will begin work resolving the differences between the two bills since identical versions of the final bill must be passed by both legislative bodies before it can be submitted to President Trump for his consideration.

How we can help

The tax reform process continues to be fluid. We will continue to inform you of the major steps as they are completed to help you understand the potential impact on you and your business. Please contact us if you have any questions regarding the proposed bills, the impact the bills would have on you and your business if enacted, or tax strategies you can adopt to take advantage of opportunities and respond to challenges tax reform may present.

  • Chastity Wilson
  • Principal
  • CLA Orlando