The Senate passed a nearly $1.5 trillion tax overhaul early Saturday after some late changes were made to the bill. The House passed a nearly $1.5 trillion tax bill two weeks ago that differs in key respects, and the two chambers will have to craft a compromise to send to President Trump, the AP reports. A comparison of the two Republican-written measures:
- Personal income tax rates: The Senate bill retains the current number of brackets, seven, but changes them to 10, 12, 22, 24, 32, 35, and 38.5%. Under current law, the top bracket for wealthiest earners is 39.6%. The House measure condenses seven brackets to four: 12, 25, 35, and 39.6%. Under the Senate bill, the reductions in personal income tax rates are temporary, ending in 2026. They're permanent in the House bill.
- Individual insurance mandate. The Senate bill repeals the ObamaCare requirement that people pay a tax penalty if they don't purchase health insurance. The House bill does not.
- Personal exemption. Both bills eliminate the current $4,050 personal exemption.
- Inheritance tax. Currently, when someone dies the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals, $11 million for couples. The Senate bill doubles those limits but does not repeal the tax. The House initially doubles the limits and then repeals the entire tax after 2023.
- Tax credits.:The Senate doubles per-child tax credit to $2,000. The House raises per-child tax credit from $1,000 to $1,600 and extends it to families earning up to $230,000. The House bill also creates a $300 tax credit for each adult in a family, which expires in 2023. Both bills preserve the adoption tax credit.
- Standard deduction. Used by about 70% of US taxpayers, currently $6,350 for individuals and $12,700 for married couples. The Senate and House bills both double those levels to $12,000 for individuals and $24,000 for couples.
- Corporate taxes: The Senate and House bills both cut the current 35% rate to 20%, but the Senate has a one-year delay in dropping the rate.
- Alternative minimum tax. The AMT is aimed at ensuring that higher-earning people pay at least some tax. The Senate bill doesn't repeal it but reduces the number of people who have to pay it. The House measure repeals the tax.
- Pass-through businesses: Millions of US businesses "pass through" their income to individuals, who then pay personal income tax on those earnings, not corporate tax. The Senate bill lets people deduct 23% of the earnings and then pay at their personal income tax rate on the remainder. The House measure taxes many of the pass-through businesses at 25%, plus creates a 9% rate for the first $75,000 in earnings for some smaller pass-throughs.
(Read more tax code