The Major Changes in the New Republican Tax Code

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Congressional Republicans fulfilled one of their biggest and most long-awaited goals: an overhaul of the tax code. Their changes—which were signed by President Donald Trump on Friday—cut corporate taxes permanently and provide temporary cuts for individuals.

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Income Tax Brackets
Individual tax provision
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Current Law
There are seven tax brackets, starting at 10 percent and reaching 39.6 percent for incomes above $418,400 for singles and $470,700 for joint filers.
Rate Single Married, filing jointly
10% Up to $9,325 Up to $18,650
15% $9,325–$37,950 $18,650–$75,900
25% $37,950–$91,900 $75,900–$153,100
28% $91,900–$191,650 $153,100–$233,350
33% $191,650–$416,700 $233,350–$416,700
35% $416,700–$418,400 $416,700–$470,700
39.6% More than $418,400 More than $470,700
Tax Proposal
It will maintain seven tax brackets, starting at 10 percent and reaching 37 percent for incomes above $500,000 for singles and $600,000 for joint filers The changes will begin in 2018 and expire after 2025.
Rate Single Married, filing jointly
10% Up to $9,525 Up to $19,050
12% $9,525–$38.7K $19,050–$77.4K
22% $38.7K–$82.5K $77.4K–$165K
24% $82.5K–$157.5K $165K–$315K
32% $157.5K–$200K $315K–$400K
35% $200K–$500K $400K–$600K
37% $500K+ $600K+
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Corporate Tax Cut
Business tax provision
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Current Law
The current corporate rate is 35 percent.
Tax Proposal
It will lower the corporate rate to 21 percent in 2018.
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Corporate Alternative Minimum Tax
Business tax provision
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Current Law
It applies a 20 percent rate as part of a parallel tax system that limits tax benefits to prevent large-scale tax avoidance. Companies must calculate their ordinary tax and AMT tax, and pay whichever is higher.
Tax Proposal
It will repeal the corporate alternative minimum tax.
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Individual Alternative Minimum Tax
Business tax provision
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Current Law
It can apply after exemption level of $54,300 for singles and $84,500 for married, joint filers, and the exemptions phase out at higher incomes.
Tax Proposal
It will increase the exemption to $70,300 for singles and $109,400 for joint filers. It will increase the phase-out threshold to $500,000 for singles and $1 million for joint filers. The higher limits will expire in 2026.
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Full and Immediate Expensing
Business tax provision
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Current Law
Businesses must take depreciation, spreading the recognition of their equipment costs for tax purposes over several years.
Tax Proposal
It will allow companies to fully and immediately deduct the cost of certain equipment purchased after Sept. 27, 2017 and before Jan. 1, 2023. After that, the percentage of cost that could be immediatey deducted will gradually phase down.
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Repatriation
Business tax provision
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Current Law
Multinationals are taxed on their global earnings at the corporate rate of 35 percent, but they can defer taxes on foreign earnings until they bring them back to the U.S., or “repatriate” them.
Tax Proposal
It will tax companies' accumulated overseas income held as cash at 15.5 percent, while non-cash holdings will be taxed at 8 percent. Companies can make the payments in eight annual installments. Going forward, the corporate income tax will focus largely on domestic economic activity, though some special levies will be aimed at preventing corporations from shifting profits offshore.
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Pass-Through Business Income
Individual tax provision
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Current Law
Pass-through businesses pass their income to their owners, who pay tax at their individual rates.
Tax Proposal
It will allow pass-through owners to deduct 20 percent from their business income, subject to limits that will begin at $315,000 for married couples, or half that for single taxpayers.
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Obamacare Individual Mandate
Individual tax provision
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Current Law
Individuals who fail to buy health insurance must pay penalties of $695 (the penalty is higher for families), or 2.5 percent of their household income—whichever is higher, but capped at the national average cost of the most basic, low-premium, high-deductible plan.
Tax Proposal
It will repeal the Affordable Care Act's individual mandate.
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Standard Deduction and Personal Exemptions
Individual tax provision
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Current Law
Single taxpayers may take a standard deduction of $6,350, and joint filers may take a deduction of $12,700. Personal exemptions of $4,050 are allowed for each family member.
Tax Proposal
It will expand the standard deduction for individuals to $12,000 and to $24,000 for joint filers. Personal exemptions will be repealed.
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State and Local Tax Deductions
Individual tax provision
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Current Law
Individuals can deduct the state and local taxes they pay, but the value is subject to certain limits for high earners.
Tax Proposal
It will cap the deduction at $10,000, which could include a combination of property taxes and either sales or income taxes.
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Mortgage Interest Deduction
Individual tax provision
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Current Law
Deductible mortgage interest is capped at loans of $1 million.
Tax Proposal
It will limit deductible mortgage interest for newly purchased first or second homes to loans of $750,000 or less, starting in 2018.
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Medical Expense Deduction
Individual tax provision
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Current Law
Qualified medical expenses that exceed 10 percent of the taxpayer’s adjusted gross income are deductible.
Tax Proposal
It will reduce the threshold to 7.5 percent of adjusted gross income for 2017 and 2018.
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Child Tax Credit
Individual tax provision
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Current Law
Families may claim a $1,000 credit for each child under 17. The credit begins phasing out for couples earning more than $110,000. The credit is at least partially refundable to qualified taxpayers who earned more than $3,000.
Tax Proposal
It will double the credit to $2,000 per child younger than 17 through 2025. It will raise the phase-out threshold to $400,000 and cap the refundable portion at $1,400 in 2018.
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Estate tax
Individual tax provision
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Current Law
Heirs must pay 40 percent in tax on estates worth more than $5.49 million for individuals and $10.98 million for couples.
Tax Proposal
It will double the thresholds so the tax applies to fewer estates. The higher thresholds will sunset in 2026.