House GOP leaders today released legislation that proposes massive changes to the Internal Revenue Code. These changes will most likely affect every US taxpayer.
Below are some highlights of the proposed bill:
- New individual tax brackets:
- 12% – Applies to income up to $45,000 individuals and $90,000 for married couples;
- 25% – Applies to income up to $200,000 for individuals and $260,000 for couples;
- 35% – Applies to income up to $500,000 for individuals and $1 million for couples; and
- 39.6% – Applies to income over $500K for individuals and $1 million for couples.
- The standard deduction would increase from $6,350 to $12.000 for single filers, and from $12,700 to $24,000 for joint filers. Personal exemptions, which were $4,050 each in tax year 2016, would be eliminated.
- The deduction for State income or sales tax would be eliminated, but State and Local property taxes would be deductible as an itemized deduction up to $10,000.
- People who own their own businesses (S Corporations, partnerships, and LLCs and proprietorships tax as a pass through entity) would pay tax at a 25% rate rather than their individual tax rate.
- Companies would be able to expense the cost of business investments in the year incurred, as opposed to spreading them out over multiple years.
- The estate tax threshold, currently $5.6 million, would double to over $10 million.
- There is no scheduled repeal of the Affordable Care Act’s individual mandate, meaning most people would still need to have health insurance to avoid a penalty.
- The child tax credit would increase from $1,000 to $1,600 per child, and there would be a $300 credit for each non-child dependent or parent for the next 5 years.
- On new home purchases, the cap on interest on mortgages would be reduced from the current $1 million dollars of principal to $500,000.
- The elimination of the following deductions:
- Student loan interest deduction;
- Medical expense deduction;
- Moving deduction; and
- Alimony payment deduction.
- The alternative minimum tax, originally enacted in 1969 to target 155 taxpayers and now ensnares about 4 per cent of taxpayers, would be eliminated.
- Other key highlights focus on the repeal of the Johnson Amendment preventing tax-exempt non-profits from making explicit election endorsements, creating a 1.4% excise tax on net investment income on universities with assets greater than $100,000 per student, and the elimination of the ability to deduct interest on bonds for sports stadiums.
To read a two page Policy Highlights of the Act, click here. For a more in-depth summary (82 pages) of the Act, click here.