It has been a busy week in Washington, D.C., as Congress works its way through tax reform. The House Ways and Means Committee completed its "markup" of the House bill this week, paving the way for a floor vote on the measure as soon as the week of Nov. 13.

Senate Republicans on Nov. 9 unveiled their tax plan, which differs considerably from the House bill in a number of ways. Significant changes to the Senate's plan and official release of the actual bill language are expected this weekend, Nov. 11-12.

Below is a comparison of where the House and Senate currently stand, although this is likely to change in the next several days.

   

House Bill

Senate Description

(Bill language not yet released)

Individual Tax Rates

Four brackets: 12 percent, 25 percent, 35 percent and 39.6 percent, with clawback of income taxed at the 12 percent rate for taxpayers in the 39.6 percent bracket

Seven brackets: 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent, 38.5 percent

Capital Gains and Qualified Dividends Rates

Zero percent if in 12 percent bracket

15 percent if in 25 percent bracket

20 percent if in 35 percent bracket

Zero percent for taxpayers with income of $38,700 or less

15 percent for taxpayers with income of $426,700 or less

20 percent for taxpayers with income over $426,700

Personal Exemption

Repealed

Repealed

Standard Deduction

$12,200 for single taxpayers, $18,300 for heads of household and $24,400 for married filing jointly

$12,000 for single taxpayers, $18,000 for heads of household and $24,000 for married filing jointly

Itemized Deductions

Eliminates deduction for medical expenses, state and local income taxes, property tax of more than $10,000, mortgage interest expense on acquisition debt of more than $500,000, certain personal casualty losses, unreimbursed employee expenses and tax preparation fees

Overall limitation on itemized deductions repealed

Eliminates deduction for state and local taxes, property taxes, unreimbursed employee expenses and tax preparation fees

Alternative Minimum Tax (AMT)

Repealed

Repealed

Carried Interest

Partnership interests received in exchange for services must be held for at least three years to be eligible for long-term capital gain tax rate

Silent

Corporate Tax Rate

20 percent starting in 2018

20 percent starting in 2019

Depreciation

Immediate deduction of capital expenditures for property placed in service in the next five years up to $5 million per year with phaseout for income above $20 million

Immediate deduction of capital expenditures for property placed in service in the next five years up to $1 million per year with phaseout for income above $2.5 million

Pass-Through Taxation

Maximum tax rate of 25 percent on business income of S corporation shareholders, partners of partnerships and sole proprietorships if owners are passive investors and based on capital percentage

Owners of businesses other than personal-service businesses can elect to apply a default capital percentage of 30 percent or establish the capital percentage based on facts and circumstances. Owners of personal-service businesses must establish the capital percentage based on facts and circumstances.

S corporation shareholders, partners of partnerships and sole proprietorships can deduct 17.4 percent of business income, but deduction is limited to 50 percent of wages paid to the owner.

Owners of personal services businesses are ineligible unless income is less than $75,000.

Interest Deduction

Interest deduction limited to 30 percent of earnings before interest, tax, depreciation and amortization (EBITDA)

Interest deduction limited to 30 percent of EBITDA

Net Operating Losses

Eliminates net operating loss carrybacks; net operating loss carry forward deduction limited to 90 percent of the taxpayer's taxable income

Eliminates net operating loss carrybacks; net operating loss carry forward deduction limited to 90 percent of the taxpayer's taxable income

Section 199 Gross Production Activities

Repealed

Repealed

Business Tax Credits

R&D and low-income housing tax credits retained

R&D and low-income housing tax credits retained

Taxation of International Income

Territorial system

U.S. shareholders must include 50 percent of excess returns earned by controlled foreign corporations

Territorial system

Minimum base erosion tax equal to 10 percent of the excess of modified taxable income over an amount equal to regular tax liability

Earnings of Foreign Subsidiaries

One-time deemed repatriation tax of 14 percent on income held as cash and 7 percent on non-cash holdings of foreign subsidiaries payable over eight years

One-time deemed repatriation tax of 10 percent on income held as cash and 5 percent on non-cash holdings of foreign subsidiaries

Dividends from Foreign Subsidiaries

Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary

Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary

Subpart F Income

Retained

Retained

Gift Tax

Retained

Rate decreased to 35 percent beginning in 2024

Exclusion amount increased to $10 million

GST

Repealed beginning in 2024

Silent

Estate Tax

Repealed beginning in 2024

Exclusion amount increased to $10 million

Exclusion amount increased to $10 million

Step-Up in Basis at Death

Retained

Silent