A Comparison of the House and Senate Tax Bills
It has been a busy week in Washington, D.C., as Congress works its way through tax reform. The House Ways and Means Committee completed its "markup" of the House bill this week, paving the way for a floor vote on the measure as soon as the week of Nov. 13.
Senate Republicans on Nov. 9 unveiled their tax plan, which differs considerably from the House bill in a number of ways. Significant changes to the Senate's plan and official release of the actual bill language are expected this weekend, Nov. 11-12.
Below is a comparison of where the House and Senate currently stand, although this is likely to change in the next several days.
| House Bill | Senate Description (Bill language not yet released) |
Individual Tax Rates | Four brackets: 12 percent, 25 percent, 35 percent and 39.6 percent, with clawback of income taxed at the 12 percent rate for taxpayers in the 39.6 percent bracket | Seven brackets: 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent, 38.5 percent |
Capital Gains and Qualified Dividends Rates | Zero percent if in 12 percent bracket
15 percent if in 25 percent bracket
20 percent if in 35 percent bracket | Zero percent for taxpayers with income of $38,700 or less
15 percent for taxpayers with income of $426,700 or less
20 percent for taxpayers with income over $426,700 |
Personal Exemption | Repealed | Repealed |
Standard Deduction | $12,200 for single taxpayers, $18,300 for heads of household and $24,400 for married filing jointly | $12,000 for single taxpayers, $18,000 for heads of household and $24,000 for married filing jointly |
Itemized Deductions | Eliminates deduction for medical expenses, state and local income taxes, property tax of more than $10,000, mortgage interest expense on acquisition debt of more than $500,000, certain personal casualty losses, unreimbursed employee expenses and tax preparation fees
Overall limitation on itemized deductions repealed | Eliminates deduction for state and local taxes, property taxes, unreimbursed employee expenses and tax preparation fees |
Alternative Minimum Tax (AMT) | Repealed | Repealed |
Carried Interest | Partnership interests received in exchange for services must be held for at least three years to be eligible for long-term capital gain tax rate | Silent |
Corporate Tax Rate | 20 percent starting in 2018 | 20 percent starting in 2019 |
Depreciation | Immediate deduction of capital expenditures for property placed in service in the next five years up to $5 million per year with phaseout for income above $20 million | Immediate deduction of capital expenditures for property placed in service in the next five years up to $1 million per year with phaseout for income above $2.5 million |
Pass-Through Taxation | Maximum tax rate of 25 percent on business income of S corporation shareholders, partners of partnerships and sole proprietorships if owners are passive investors and based on capital percentage
Owners of businesses other than personal-service businesses can elect to apply a default capital percentage of 30 percent or establish the capital percentage based on facts and circumstances. Owners of personal-service businesses must establish the capital percentage based on facts and circumstances. | S corporation shareholders, partners of partnerships and sole proprietorships can deduct 17.4 percent of business income, but deduction is limited to 50 percent of wages paid to the owner.
Owners of personal services businesses are ineligible unless income is less than $75,000. |
Interest Deduction | Interest deduction limited to 30 percent of earnings before interest, tax, depreciation and amortization (EBITDA) | Interest deduction limited to 30 percent of EBITDA |
Net Operating Losses | Eliminates net operating loss carrybacks; net operating loss carry forward deduction limited to 90 percent of the taxpayer's taxable income | Eliminates net operating loss carrybacks; net operating loss carry forward deduction limited to 90 percent of the taxpayer's taxable income |
Section 199 Gross Production Activities | Repealed | Repealed |
Business Tax Credits | R&D and low-income housing tax credits retained | R&D and low-income housing tax credits retained |
Taxation of International Income | Territorial system U.S. shareholders must include 50 percent of excess returns earned by controlled foreign corporations | Territorial system Minimum base erosion tax equal to 10 percent of the excess of modified taxable income over an amount equal to regular tax liability |
Earnings of Foreign Subsidiaries | One-time deemed repatriation tax of 14 percent on income held as cash and 7 percent on non-cash holdings of foreign subsidiaries payable over eight years | One-time deemed repatriation tax of 10 percent on income held as cash and 5 percent on non-cash holdings of foreign subsidiaries |
Dividends from Foreign Subsidiaries | Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary | Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary |
Subpart F Income | Retained | Retained |
Gift Tax | Retained
Rate decreased to 35 percent beginning in 2024 | Exclusion amount increased to $10 million |
GST | Repealed beginning in 2024 | Silent |
Estate Tax | Repealed beginning in 2024
Exclusion amount increased to $10 million | Exclusion amount increased to $10 million |
Step-Up in Basis at Death | Retained | Silent |
Holland & Knight's Public Policy & Regulation Group and Taxation Team will continue to update on the topics above.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.