Senate-House Conferees Reach Agreement on the Tax Cuts and Jobs Act of 2017, the Republican Version of Tax Reform
• Top individual tax rate is lowered from 39.6 percent to 37 percent.
• Corporate tax rate is lowered from 35 percent to 21 percent — this rate is 1 percentage point higher than the 20 percent rate initially passed by the Senate and House.
• Deduction for pass-through businesses is set at 20 percent. This deduction when combined with the decreased top rate for individuals makes a top marginal tax rate of 29.6 percent.
• Mortgage interest deduction is lowered to $750,000. This amount is a compromise. This is half way between the $500,000 limit passed by the House and the prior $1 million limit of the law favored by the Senate.
• Estate tax exemption is doubled. This was the Senate position. Hence for 2018, the exemption will be $11.2 million. This rate is indexed for inflation from 2010 from $5 m
• Income tax exclusion for tuition waivers are preserved for grad students. This was the Senate position.
• Deduction for student loan interest is preserved.
• Deduction for medical expenses is preserved. The House wanted to eliminate the deduction. However, the floor is actually lowered for two years from 10 percent to 7.5 percent of adjusted gross income. Senator Collins of Maine, a Republican moderate, insisted on this change to assure her vote.
• Corporate alternative minimum tax is repealed.
• Exemption for the personal alternative minimum tax is raised from $54,300 to $500,000 for individuals and from $84,500 to $1 million for families.
• Penalty for not having health insurance is repealed. This effectively eliminates ObamaCare’s individual mandate.
• The Arctic National Wildlife Refuge is opened to energy exploration. This was required to get the vote of Senator Murkowski, another Republican moderate. Adding a non-tax provision was required for it to be a reconciliation bill, so only a majority vote is required in the Senate. Otherwise the Senate filibuster rule of 60 votes would required. This is how Democrats in 2010 got the Affordable Care Act, Obamacare, passed.
Note, not all of the bill has been drafted. They are still working on other details, such as how many tax brackets to have. We shall see.
This article has been written by Kevin Staker. Kevin Staker is found on Twitter at https://twitter.com/kevinstaker. The Superlawyer profile of Kevin Staker is found at https://profiles.superlawyers.com/california-southern/camarillo/lawyer/kevin-g-staker/d9fa5c59-0c2a-4e8f-94e0-682892fe4481.html. Kevin Staker is also on Facebook at https://www.facebook.com/Kevin-Staker-of-StakerLaw-38289441240/. Finally, please note the probate and trust mediation practice of Kevin Staker has completed its first, very successful year. The website is found at http://kevin-staker-mediation.com/.