Conference committee approves tax reform legislation

By Alistair M. Nevius
Updated: 

The conference committee negotiating changes to the House and Senate tax reform bills has agreed to legislative language that will be sent to both houses of Congress next week for a vote. A majority of the Senate conferees and a majority of the House conferees were required to sign off on the revised bill, which they did on Friday.

The full language of the bill was released Friday evening, and major changes from the bills that passed the House and Senate include:

  • A top individual rate of 37% (the House had proposed a top rate of 39.6%, and the Senate’s bill had a top rate of 38.5%).
  • A corporate tax rate of 21%, effective in 2018 (the House and Senate bills had both lowered the rate to 20%, but the Senate’s version had postponed that rate until 2019).
  • The corporate alternative minimum tax (AMT) would be repealed.
  • The individual AMT would remain, but the exemption amount would increase.
  • A mortgage interest deduction limit of $750,000 (the House bill had reduced the limit to $500,000; the Senate bill had kept the current-law limit of $1 million).
  • A 20% deduction for passthrough income (the Senate bill had proposed a 23% deduction; the House bill had proposed setting a 25% tax rate on passthrough income).
  • Taxpayers would be allowed to deduct up to $10,000 in state and local income or property taxes (the House and Senate bills had proposed allowing a $10,000 deduction against state and local property taxes).
  • The estate tax exemption would double.
  • The child tax credit would increase to $2,000, with up to $1,400 refundable.

Various deductions that the House bill would have repealed will remain under the final bill, including the medical expense deduction, the student loan interest deduction, and the deduction for educators’ classroom expenses.

Alistair M. Nevius (Alistair.Nevius@aicpa-cima.com) is the JofA’s editor-in-chief, tax.

SPONSORED REPORT

6 key areas of change for accountants and auditors

New accounting standards on revenue recognition, leases, and credit losses present implementation challenges. This independently-written report identifies the hurdles that accounting professionals face and provides tips for overcoming the challenges.

PODCAST

How tax reform will impact individual taxpayers

Amy Wang, a CPA who is a senior technical manager for tax advocacy at the AICPA, answers to some of the most common questions on how the new tax reform law will impact individual taxpayers.