On December 2, 2017, the Senate Passed their version of the Tax Cuts and Jobs Act. The Senate Bill has significant differences form the House Bill that passed on November 16, and the House and Senate must now work together to reconcile the two bills to produce a final package to be voted on by both chambers of Congress. Once it passes that hurdle, the bill can be sent to the President for signature.
Some of the more notable items in the Senate Bill are:
- the provision of 7 tax brackets, rather than the 4 proposed in the House bill, and a top tax rate of 38.5 percent versus 39.6 percent in the House bill;
- a repeal of state and local tax deductions, except that, like the House bill, a deduction of up to $10,000 of property tax is allowed;
- keeping current law provisions regarding the deduction of mortgage interest on a principal residence but, like the House bill, repealing entirely interest deductions on home equity indebtedness;
- a repeal of miscellaneous itemized deductions, where the House bill only repealed several components of this deduction;
- the retention of the personal casualty loss deduction for events in presidentially declared disaster areas (the House bill repealed all personal casualty loss deductions);
- a child tax credit of $2,000, $400 more than the House bill, and;
- an increase in the alternative minimum tax (AMT) exemption amount, as opposed to the House bill’s full repeal of the AMT.
Neither bill eliminates the deduction for medical expenses, alimony, or student loan interest.
Similar to the House bill, the Senate bill would reduce the corporate tax rate to 20%, but the new rate would go into effect in 2019, a year later than the House version.