Taxes

New Tax Bill — What’s Next?

December 6, 2017

You may know the GOP Tax Reform Bill passed, but what does it mean? Learn about the bill and what it means for yourself and your business.

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Last week was a busy one in the nation’s capital. The House passed their version of the GOP tax reform bill, which then went on to the Senate, where it passed by a two-vote margin early Saturday morning. You can take a look at the entire bill and all the associated actions here.

There is still a lot of work before they sign the final bill into law. The differences between the two versions are significant, and compromises must be hashed out in a conference committee. So where do these bills differ, and what does it mean for you?

  • Individual tax cuts in the Senate version sunset in 2025—a strategy designed to save money so this version meets reconciliation rules—whereas the House bill makes these cuts permanent. Corporate tax breaks are permanent in both versions of the bill.
  • The corporate tax rate is currently 35%. Both the House and Senate versions of the bill reduce it to 20%, with the Senate bill enacting the new rate in 2019 and the House bill enacting it on January 1, 2018. On Saturday President Trump stated he may be willing to bump that up to 22%.
  • The House bill does not repeal the Affordable Care Act’s individual mandate. The Senate bill does repeal it.
  • The House bill completely repeals estate taxes, regardless of the value of the estate. The Senate bill doubles the exemption, allowing $11 million to be passed on tax free.
  • The Senate bill preserves the current $1 million mortgage interest deduction, compared to the House version which cuts that figure in half to $500,000.
  • The alternative minimum tax (AMT) is repealed in the House bill. The Senate bill keeps it in place. The AMT operates alongside the regular income tax. It requires many taxpayers to calculate their liability twice—once under the rules for the regular income tax and once under the AMT rules—and then pay the higher amount. The original intent was to prevent perceived abuses by a handful of the very rich.
  • The House bill has four tax brackets with no changes to the top rate (36.9%). The Senate bill has seven tax brackets and lowers the top rate to 38.5%. To see how the new laws may impact your taxes, take a look at this calculator, which can give you some idea of what to expect.
  • Right now the child tax credit gives parents $1,000 per child. Under the House bill, that increases to $1,600. The Senate increase it to $2,000 per child.
  • The House bill eliminates student loan interest deductions while the Senate bill maintains it.
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Tax-free employee benefits look to be on the chopping block. Education assistance programs, dependent care and adoption assistance programs, moving expenses and “achievement awards” of tangible items such as watches, plaques, and gift cards could be eliminated or greatly reduced or eliminated.

The tax reform bill is intricate. What it will ultimately end up looking like is pretty much a guessing game. Journey Employer Solutions will keep you posted as updates occur. Make an appointment with one of our professionals to develop the best strategy for you, your company, and employees.


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