In a press conference Thursday, November 2, House Speaker Paul Ryan unveiled details of the newly-released GOP tax bill. Ryan called the legislation a “middle-class tax cut” that would leave the average American family of four with $1,182 more in their bank accounts.
The Tax Cuts and Jobs Act bill, authored by House Ways and Means Committee chair, Kevin Brady (R-TX), seeks to cut corporate tax, change state and local tax deductions, and create new individual tax brackets.
Key Revisions of the Proposed Tax Bill
The Creation of 3 New Tax Brackets
The current tax brackets of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% will be reduced to four brackets:
The highest tax bracket would stay at 39.6%, but a fourth marginal tax bracket would apply to high-incomes (for married couples making more than $1 million annually).
For individuals, the standard deduction of $6,350 is increased to $12,000, but the personal exemption of $4,050 is eliminated.
For joint filers, the standard deduction of $12,700 is increased from $12,700 to $24,000, but the personal exemption of $4,050 is also eliminated in the new bill.
Corporate Tax Cut
The corporate tax rate will be permanently lowered from 35% to 20%.
State and Local Tax Deductions
The bill allows for an itemized property tax deduction for property taxes, but only up to $10,000.
Deductible Mortgage Interest
The new bill allows existing mortgages to keep their current deduction structure. However, on new mortgages, homeowners can only claim a deduction for interest on mortgages up to $500,000 (down from the current $1M).
Delayed Estate Tax Repeal
The new bill delays a repeal of the estate tax to 2024 for estates with $5.5 million in assets or higher.
401(k) Retains Cap
The cap on pre-tax contributions for 401ks will remain at $18,000.
It is recommended that you visit with your tax advisor to find out how these changes will impact your finances now as well as in the future.
Read the full text of the Tax Cuts and Jobs Act here.