U.S. Senate Passes Tax Bill – What does it mean for you?
Joe O'Connor, CPA
The U.S. Senate passed its version of a tax bill in the early morning hours on Saturday. Similar to the bill passed by the House of Representatives in mid-November, the bill has broad changes to the tax code impacting individuals as well as corporations. Since the Senate and House bills are not the same, they will need to agree on one bill before sending it to the President to sign into law. Below is a brief summary of the Senate bill.
The Senate bill keeps the number of individual tax brackets of seven. However, the tax rates and the income at which each rate applies will change, and the new brackets will expire in 2025. The top tax rate is reduced to 38.5% from 39.6%. A comparison of current law to the Senate bill is shown at the table included.
Similar to the House bill, various deductions and credits for individuals would be impacted. Here are a few highlights.
- The standard deduction nearly doubles to $24,000 for joint filers and $12,000 for single filers, up from $12,700 and $6,350.
- The deduction for personal exemptions, including dependents, is gone.
- The child tax credit increases to $2,000 from $1,000 per child.
- The deduction for state and local income tax is eliminated.
- The deduction for real estate taxes is limited to $10,000.
- The amount of supplies teachers may deduct increases to $500 from $250.
- The medical expenses deduction expands.
- Eliminates the mandate requiring individuals buy health insurance.
The Senate bill also reduces the top corporate tax rate to 20% from 35%, but this would not go into effect until 2019. Certain pass-through income would be allowed an additional deduction, rather than having all pass-through income taxed at the individual rates as under current law.
We will continue to follow the progress of the tax bills. If any significant changes occur, we will provide updates as necessary.