House vs. Senate Tax Bill: Comparison Chart and What You Need to Know
The U.S. House of Representatives and the Senate recently unveiled their own versions of the 2018 Tax Bill, which contains a plethora of major of changes to the tax landscape for both businesses and individuals. Below are a few highlights and a comparison between both bills:
Businesses |
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Topic |
House Bill |
Senate Bill |
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Tax rate | Lowers the corporate tax rate to 20% and 25% for certain personal services corporations beginning calendar year 2018. | Lowers the corporate tax rate to 20% beginning calendar year 2019. | |||||||||||||||||||||||||||||||||||||||
Alternative Minimum Tax (AMT) | Eliminated | Same | |||||||||||||||||||||||||||||||||||||||
Expansion of Section 179 | Businesses may immediately expense qualifying property up to a limit of $5 million. |
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Net interest expense capping | Caps the deductibility at 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA). | Caps the deductibility at 30% of earnings before interest and taxes (EBIT). | |||||||||||||||||||||||||||||||||||||||
Net operating loss carrybacks | Eliminates net operating loss carrybacks and limits net operating loss (NOL) carryforwards to 90% of taxable income. | Eliminates net operating loss carrybacks and limits net operating loss (NOL) carryforwards to 80% of taxable income. | |||||||||||||||||||||||||||||||||||||||
Deductions and credits (highlights) | Eliminates these popular deductions/credits:
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Eliminates:
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Small business eligibility for cash accounting | Increases from $5 million to $10 million. | Increases from $5 million to $15 million. | |||||||||||||||||||||||||||||||||||||||
Territorial tax system for U.S. subsidiaries of foreign-based entities | Enacts territorial tax system with base erosion rules for passive income and anti-abuse rules for U.S. subsidiaries of foreign-based entities. | Same | |||||||||||||||||||||||||||||||||||||||
Deferred foreign income | Implements a one-time repatriation rate of currently deferred foreign income:
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Implements a one-time repatriation rate of currently deferred foreign income:
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Employee compensation | N/A | Enacts new credit for compensation paid to employees while on leave. | |||||||||||||||||||||||||||||||||||||||
Estates and Trusts |
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Topic |
House Bill |
Senate Bill |
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Basic exclusion | Doubles it from $5 million to 10 million. | Same | |||||||||||||||||||||||||||||||||||||||
Estate and Generation-skipping Transfer (GST) taxes | Repealed after 2023. Beneficiary will maintain a step-up in basis in the estate property. | N/A | |||||||||||||||||||||||||||||||||||||||
Individuals and Families |
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Topic |
House Bill |
Senate Bill |
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Tax brackets | Consolidates tax brackets/rates:
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Changes to tax brackets/rates:
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Standard deduction and personal exemptions | Increases standard deduction and eliminates personal exemptions:
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Increases standard deduction and eliminates personal exemptions:
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Alternative minimum tax | Repeals the alternative minimum tax with the ability to claim refund of 50% of unused AMT credits. | Same | |||||||||||||||||||||||||||||||||||||||
Taxation of pass-through entities | Lowers maximum rate for pass-through income to 25% with anti-abuse rules:
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Mortgage Interest Deduction | Limits Home Mortgage Interest Deduction:
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Retains mortgage interest deduction for home purchases, but eliminates the mortgage interest deduction for home equity debt. | |||||||||||||||||||||||||||||||||||||||
State and local income/sales tax deduction | Eliminated | Also eliminated with the exception of taxes accrued or paid in operating a trade or business. | |||||||||||||||||||||||||||||||||||||||
Real property taxes | Limits State and local deduction of real property taxes to $10,000 maximum. | Eliminated | |||||||||||||||||||||||||||||||||||||||
Health insurance | N/A | Eliminates the Affordable Care Act (ACA) individual shared responsibility payment to zero. | |||||||||||||||||||||||||||||||||||||||
Itemized deductions |
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Most itemized deductions are eliminated. This excludes, but is not limited to:
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On Tuesday, November 14, 2017, House Speaker Paul Ryan described the current plans as a "work in progress." He said he expects the two chambers to pass separate legislation before going to a conference committee to craft a joint plan. In an interview with CNBC on Tuesday, House Majority Leader Kevin McCarthy contended that the House and Senate can quickly reconcile the differences and get a final bill to Trump's desk by the end of the year.
Moore Colson will provide all relevant updates so you can stay informed and plan appropriately. Please contact your Moore Colson Partner with any questions.