The House and Senate voted Tuesday and early Wednesday, to pass the largest overhaul of the U.S. tax code in more than 30 years. The bill passed on a 227-203 vote. No Democrats voted for the new legislation.
In the Senate, the Tax Cuts and Jobs Act passed on a 51-48 vote at 12:40 a.m. ET on Wednesday. President Trump is expected to sign the legislation before Christmas.
The House will vote again on the bill on Wednesday because of technical issues with the first vote.
Here are a few takeaways from the new law.
- The corporate tax rate has been cut from 35 percent to 21 percent beginning on Jan. 1, 2018.
- The 20 percent corporate alternative minimum tax has been repealed.
- The legislation creates a 20 percent deduction for the first $315,000 on pass-throughs, or businesses such as partnerships. The deduction is for qualified business income for joint filers.
- The law imposes a one-time mandatory tax of 8 percent on illiquid assets, assets not easily converted into cash, and 15.5 percent on cash and cash equivalents for U.S. business profits held overseas. The more than $2 billion held now in overseas banks is a product of a rule that made foreign profits tax-deferred if they are not brought into the United States, or repatriated.
- Businesses may now write off the full value of investments in new plant and equipment for five years. Beginning in year six, the 100 percent expensing of a new plant and equipment is eliminated.
- The bill provides tax credits for producing electricity by using geothermal, solar, municipal waste, hydropower, biomass and wind.
- For individuals, the current seven tax brackets remain, but income levels and rates have been changed.
- For homes purchased from Jan.1, 2018 through Dec. 31, 2025, the bill caps the deduction for mortgage interest at $750,000 in home loan value. After Dec. 31, 2025, the cap is $1 million in loan value. The bill also suspends the deduction for interest on home equity loans until 2026.
- The standard deduction has been increased to $12,000 from $6,350 for individuals, and to $24,000 from $12,700 for married couples filing jointly..
- The child tax credit has doubled to $2,000 per dependent child under age 17. There is a refundable portion of $1,400.
- The personal exemption of $4,050 is eliminated. The personal exemption is a fixed exemption some could take off their adjusted gross income.
- The exemption for estate and gift taxes is increased to $10 million from $5 million per person.
- Beginning in 2019, the new legislation eliminates the Affordable Care Act’s individual mandate.
- Families can deduct up to a total of $10,000 in local property and state and local income taxes.
- Below are the changes in income tax rates for married couples filing jointly and for singles. The changes take effect on Jan. 1, 2018.
10 percent up to $19,050, versus 10 percent up to $18,650 under existing law;
12 percent on $19,051 to $77,400, versus 15 percent on$18,651 to $75,900;
22 percent on $77,401 to $165,000, versus 25 percent on $75,901 to $153,100;
24 percent on $165,001 to $315,000, versus 28 percent on $153,101 to $233,350;
32 percent on $315,001 to $400,000, versus 33 percent on $233,351 to $416,700;
35 percent on $400,001 to $600,000, versus 35 percent on $416,701 to $470,700
37 percent above $600,000, versus 39.6 percent above$470,700.
For single individuals, effective Jan. 1, 2018 and ending in 2026, income tax would be:
10 percent up to $9,525, versus 10 percent up to $9,325 under existing law;
12 percent from $9,526 to $38,700, versus 15 percent on $9,326 to $37,950;
22 percent on $38,701 to $82,500, versus 25 percent on $37,951 to $91,900;
24 percent on $82,501 to $157,500, versus 28 percent on $91,901 to $191,650;
32 percent on $157,501 to $200,000, versus 33 percent on $191,651 to $416,700;
35 percent on $200,001 to $500,000, versus 35 percent on $416,701 to $418,400;
37 percent above $500,000, versus 39.6 percent above $418,400.
These brackets would expire after 2025.
- The bill also allows drilling in Alaska’s Arctic National Wildlife Refuge.