10 Nov SENATE’S PROPOSED TAX REFORM BILL IS OUT!
The big news of the day is that Schweitzer announced they will be opening November 18th – so that’s got me pretty excited. Also exciting is that, yesterday, the Senate Finance Committee released a proposed tax reform bill called the Tax Cuts and Jobs Act.
The Senate bill contains many of the same proposals as last week’s House bill – but also has some noteworthy differences. For example, while the House bill creates four income tax brackets for individuals, the Senate bill provides for a seven-bracket system, with tax rates of 10%, 12%, 22.5%, 25%, 32.5%, 35%, and 38.5%.
The standard deduction in the Senate bill would become $12,000 for single taxpayers, $24,000 for married couples, and $18,000 for head-of-household filers. The child tax credit would become $1,650 and would be modified to allow a $500 nonrefundable credit for qualifying dependents other than qualifying children. Also, the Senate bill keeps the adoption credit.
While the House bill would allow a deduction for state and local real property taxes up to $10,000, the Senate bill eliminates the deduction for all state and local taxes. However, the Senate bill would keep the current deduction for medical expenses that exceed 10% of a taxpayer’s adjusted gross income. Also, the Senate bill would retain the current limit of $1 million of acquisition debt for the mortgage interest deduction, but it would nix the deduction for interest on home equity indebtedness.
There is no repeal of the estate tax in the Senate bill, but it does double the exemption amount.
For businesses, the Senate bill would allow individuals to deduction 17.4% of “domestic qualified business income” passed through from a partnership, S corporation or sole proprietorship. However, this deduction would not apply to specified services businesses, except for married taxpayers with taxable income of $150,000 or less ($75,000 for singles). For taxpayers who have qualified business income from a partnership or s-corporation, the amount of the deduction would be limited to 50% of the W-2 wages of the taxpayer – which I’m not quite sure I understand entirely because partners in a partnership or LLC are not supposed to receive a W-2.
Lastly, the Senate bill lowers the corporate tax rate to 20% but would delay the rate change until 2019.
So, there is a lot to work out between the two bills before legislation is enacted. Stay tuned!