Both the House and Senate bills would eliminate the personal exemption, which is currently set at $4,150 in 2018. The House would scrap the additional standard deduction for the blind and elderly; the Senate would retain it. The Senate's changes to the personal exemption would be reversed in 2025.
The House bill would scrap most itemized deductions, including those for medical expenses and student loan interest. The charitable giving deduction would be left unchanged, as would the mortgage interest deduction for existing homes. New mortgages would be subject to a lower cap: married couples can currently deduct interest on mortgages worth up to $1,000,000; that would fall to $500,000.
The House bill would raise the standard deduction to $24,400 for married couples filing jointly in 2018 (from $13,000 under current law), to $12,200 for single filers (from $6,500), and to $18,300 for heads of household (from $9,550).
The Senate version would raise the standard deduction to $24,000 for married couples filing jointly, $12,000 for single filers and $18,000 for heads of household. Under the revision released Nov. 14, these and all other changes to individual taxes would be reversed in 2025 in order to comply with reconciliation rules (which allow the GOP to pass the bill with a filibuster-proof simple majority).
The House bill would raise the child tax credit to $1,600 from $1,000 and providing filers, spouses and non-child dependents with a temporary $300 credit. Only the first $1,000 of the child tax credit would be refundable initially, but this amount would rise to $1,600 with inflation. The $300 credit would end after five years.
The Senate would raise the child credit to $2,000 – originally $1,650 – with the first $1,000 refundable, and create a non-refundable $500 credit for non-child dependents. The credit would begin to phase out at $500,000 for married couples (not indexed to inflation), a significant increase from the current $110,000 (but a decrease from the original Senate version's $1,000,000). The Senate would also raise the age cap for qualifying children from 17 to 18. These changes would be reversed in 2025. Marco Rubio (R-Fla.) and Mike Lee (R-Utah) are pushing for an amendment to make the credit more generous.
A last minute change introduced by Sen. Ted Cruz (R-TX) passed after a tie-breaking vote from Vice President Pence, expanding education savings accounts (ESAs) to include expenses related to religious schools and home-schooled students (the House version has a similar provision).
State and local property tax deductions would remain under the Senate and House proposals but would be capped at $10,000. State and local income tax deductions would be eliminated.
Paid tax preparers must perform due diligence to determine clients' eligibility to file as heads of household, with a $500 penalty for each failure to do so.
Both the House and Senate versions would repeal the alternative minimum tax (AMT), a device intended to curb tax avoidance among high earners by making them estimate their liability twice and pay the higher amount. Some Senators have proposed leaving the AMT partially intact to reduce the bill's budget impact.
The house bill would raise the estate tax exemption for single filers to $10 million from $5.6 million in 2018 and repeal the tax entirely after six years, along with the generation-skipping transfer (GST) tax. The Senate would raise the exemption to $11.2 million, but not repeal the tax.
Both the House and Senate bills would permanently lower the top corporate tax rate to 20% from its current 35% and repeal the corporate alternative minimum tax. The Senate bill would delay the rate cut for one year, however, until 2019. Some Senate Republicans are reportedly pushing for a slightly higher corporate tax rate, perhaps of 22%, in order to fund a higher child tax credit or reduce the bill's impact on the deficit.
The House bill would allow businesses to immediately write off the costs of new equipment, rather than depreciating the value of these assets over time, but the provision would end after five years. The section 179 deduction, which allows small businesses to take a depreciation deduction for certain assets in the year they are bought, would be capped at $5 million, compared to the current $500,000, and the phaseout threshold would rise to $20 million.
The Senate bill would also allow full expensing of capital investments for five years and shorten the depreciation schedule for real property to 25 years. Section 179 expensing would be capped at $1 million, and the phaseout threshold would rise to $2.5 million.