After officially releasing the final details on Friday night, Republicans in Congress set votes for next week in the House and Senate on a sweeping overhaul of the federal tax code, as GOP leaders expressed confidence that they would have the votes to pass the first major tax reform package since 1986.
“This is what the American people have been waiting for: more jobs, fairer taxes, and bigger paychecks,” said House Speaker Paul Ryan.
“The Tax Cuts and Jobs Act is now only two votes and a signature away from becoming the law of the land,” Ryan added, as Republicans said a vote would take place on Tuesday in the House.
“I’m very excited about this moment,” said Rep. Kevin Brady (R-TX), the lead tax-writer as Chairman of the House Ways and Means Committee.
If you want to read through the bill, and the basic explanation of what the provisions would do, then click here, and take a look at the final version of the Tax Cuts and Jobs Act of 2017.
The first 500-plus pages is the bill text, followed by another almost 600 pages of explanation and financial charts about the legislation.
Here’s some of the high points:
1. Final tax brackets more tax cuts than tax reform. The House plan envisioned just four tax brackets, instead of the current seven. But the final deal left the current system in place, and focused mainly on cutting the income tax rates. The current tax brackets are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. This GOP plan trims that to 0%, 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Here’s a graphic from the bill on what the new system looks like:
2. Individual tax changes are temporary, most business tax changes are permanent. In order to hold down on the cost of this bill, Republicans set the plan so that almost all of the individual tax changes for individuals expire after 2025, in eight years. So, for example, the tax brackets listed above – if Congress does not act by the start of 2026, those tax cuts would then increase back to the previous 2017 level – this is exactly what happened with the Bush tax cuts of 2001/2003 and the “fiscal cliff” at the end of 2012.
3. Individual mandate tax penalty ends – but not in 2018. Added by the Senate, the provision that ends the tax penalty for not buying health insurance coverage under the Obama health law will be zeroed out, but not immediately. The final GOP plan allows the individual mandate to stay in effect in 2018 – so if you were thinking about rolling the dice and not getting insurance for next year, that would put you in the crosshairs of a tax penalty from the IRS.
4. Some notable things that are NOT happening in the GOP bill. Some issues went away in the House-Senate negotiations. The final bill does not include provisions that would make tuition awards for graduate students into taxable income. The bill will not force people to pay taxes on employer provided tuition aid for people working at colleges and universities. The bill will not increase the amount of time that you need to own and occupy a principal residence in order to qualify for certain tax free gains on the sale of that home. And the deduction for teachers who buy school supplies, that was preserved at $250 (the Senate wanted to double it to $500, but that was not included in the final deal).
5. If you closed on your expensive home Friday, you’re in luck. The final GOP tax reform bill makes changes in how people can deduct mortgage interest payments. Current law states that such a mortgage deduction is limited to no more than a mortgage of $1,000,000 – this plan drops the upper limit to $750,000 (the House had proposed a $500,000 cap). Unlike other provisions, this $750,000 change has a retroactive component to it, as it plainly states that you had to have purchased your home by December 15, 2017 to qualify for the old $1 million limit. So, if you closed on your house on Friday with a mortgage of over $750,000, you will fare better on your tax return than someone who closes on that same home a day later.