What’s New in the Senate’s Tax Plan That Could Affect You

Last week, Republican Senate lawmakers unveiled their plan for tax reform, a response to the House version that had been introduced in early November.

This week, Senate Republicans are gearing up to hash out the bill’s details in committee, while the House version goes to the floor for a vote. While both aim to fulfill President’s Trump’s goal of overhauling the tax code, there are some key ways that the Senate’s version differs from the House’s.

KEEPS 7 TAX BRACKETS

Currently, there are seven tax brackets: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent. The House plan proposed cutting those down to just four: 12 percent, 25 percent, and 35 percent, while retaining the 39.6 percent top tax rate. The Senate version, meanwhile, proposes keeping seven tax brackets, but with slight adjustments to 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent and 38.5 percent.

ELIMINATES STATE AND LOCAL TAX DEDUCTIONS

The Senate plan would get rid of all federal deductions for state and local taxes. The House version, meanwhile, gives a little more leeway: Although it eliminates deductions for what you pay in state and local income taxes, it allows for deductions on state and local property taxes — with a $10,000 limit.

KEEPS THE ESTATE TAX INTACT

The House plan proposed nearly doubling the estate tax exemption from the current $5.49 million to more than $10 million, and then repealing the estate tax altogether starting in 2024. The Senate version also seeks to double the estate tax exemption, but it proposes retaining the estate tax.

RAISES CHILD TAX CREDIT

The Senate bill would increase the Child Tax Credit from $1,000 to $1,650. The House version had proposed increasing that credit to $1,600, while also adding a $300 credit for each parent or non-child dependent (like an aging grandparent) in a family.

RETAINS SOME KEY TAX BREAKS

There are a number of deductions that the House plan proposed eliminating that the Senate version wants to keep. For example, the House plan limited the amount of interest homeowners could write off on new mortgage debt to the first $500,000 of their home loans. Senate Republicans are proposing keeping that cap to the current $1,000,000. The Senate also wants to keep the medical expense deduction and the student loan interest deduction in place, both of which were cut from the House proposal.

HITS PAUSE ON A LOWER CORPORATE TAX RATE

Both the House and Senate bills want to reduce the corporate tax rate from its current 35 percent to 20 percent, but House legislators want to enact the cut starting in 2018, while Senate lawmakers want to hold off until 2019.

Here’s what’s the same about both bills: standard deductions will still be doubled to $12,000 for individuals and $24,000 for married couples filing jointly, and personal exemptions would become a thing of the past. These similarities, however, likely won’t be enough to head off heated debate, which could prove a roadblock to Republican leaders’ goal of getting a bill to the president’s desk by the end of the year.