House Republicans on Thursday introduced their tax bill, providing long-awaited details about their plans to revamp the U.S. tax code and slash rates for companies and individuals. (You can see the full 429-page bill, or summarized versions, here.)
Here’s a rundown of the key provisions in the bill:
For Individual Taxes:
- Collapses seven tax brackets to four:
- 12 percent on the first $45,000 of taxable income for individuals, or $90,000 for married couples
- 25 percent from $45,000 to $200,000, or $90,000 to $260,000 for married couples
- 35 percent from $200,000 to $500,000, or $260,000 to $1 million for married couples
- 39.6 percent for $500,000 and up, or $1 million for married couples.
- Nearly doubles the standard deduction to $12,200 for individuals and $24,400 for married couples, though the benefit of the higher deduction is offset by the elimination of personal exemptions.
- Raises the child tax credit from $1,000 to $1,600, and adds a temporary $300 credit for every taxpayer, spouse and non-child dependent.
- Leaves the top rates on capital gains and dividends unchanged.
- Lowers the cap on the mortgage-interest deduction to loans up to $500,000, down from $1 million, though loans made before Thursday would be grandfathered in at the higher level.
- Repeals the Alternative Minimum Tax.
- Doubles the estate tax exemption (currently $5.49/$11 million) and repeals the tax entirely starting in 2024.
- Eliminates the deduction for state and local income taxes and sets a $10,000 cap on deductions for state and local property taxes
- Repeals the deduction for student-loan interest.
- Repeals the deduction for medical expenses.
- Repeals the adoption tax credit.
- Keeps existing rules for 401(k)s and charitable deductions.
For Business Taxes:
- Slashes the corporate tax rate from 35 percent to 20 percent and, despite reports that tax writers were waffling on whether that lower rate should sunset, would makes the lower rate permanent.
- Lowers rate for pass-through entities to 25 percent, with complex guardrails to prevent abuse. (Axios: "There are two approaches to pass-through guardrails. The simple approach allows businesses to classify 70 percent of income as wages and 30 percent as income. The second option allows business owners to have more income classified as business income, rather than wages.")
- Caps corporate interest deductions at 30 percent of earnings before interest, taxes, depreciation and amortization, with some exceptions.
- Sets a one-time tax on repatriated foreign profits at 12 percent on cash holdings and a 5 percent on illiquid investments
- Introduces a 10 percent minimum tax on foreign subsidiaries of U.S. companies, calculated on a global basis
- Eliminates a rule that's been blamed for skyrocketing executive compensation.
- Allows for the immediate expensing of capital investments.