Differences Between the Senate GOP Tax Bill and the House GOP Tax Bill

One of the campaign promises that many Republicans are determined to keep is tax reform. House and Senate Republicans have worked on a tax bill that they believe will provide relief to hard-working Americans across the country. However, the bills are not the same.

Key Differences You Need to Know About the Proposed Tax Overhaul

The GOP in the Senate and the GOP in the House have proposed their own versions of a tax plan for America. However, there are key differences between the two bills that will need to be ironed out before a final bill can be sent to President Trump for his signature. Some of the differences to watch when Republicans try to reconcile the two bills include:

  • Tax Brackets

One of the main goals of the tax bill is to simply the tax brackets. Currently, we have seven tax brackets; however, the House proposal cuts those brackets from seven to four. It does keep the top tax bracket at the same percentage, but increases the lowest tax bracket to 12 percent. The Senate bill retains seven tax brackets, but it changes four of the tax brackets.  Senators propose to keep the lowest tax bracket at 10 percent; however, they lower the highest tax bracket to 38.5 percent.

It is estimated that the House plan will add approximately $1 trillion to the deficit over the next ten years because higher earners would pay less into the system. The Senate bill keeps the brackets, but it adjusts the numbers to change who pays more or less in taxes.

  • Medical Expenses Deduction

The House bill has many seniors, people with disabilities, and other individuals with high medical expenses worried because the bill will eliminate the deduction for high medical costs. The Senate’s bill leaves the deduction for medical expenses in the tax bill. Because some individuals and families face extreme medical expenses each year, the elimination of the medical expense deduction could result in a significant increase in the income tax owed by those parties.

  • Local and State Tax Deductions

Eliminating the deduction for state and local property taxes and other taxes could cost some Americans a significant amount of money each year in increased taxes.  House Republicans decided on a partial repeal of this deduction while Senate Republicans completely eliminated the deduction in the Senate bill. This issue affects taxpayers in states with high taxes more so than taxpayers in states without this type of state or local tax; therefore, Republicans must answer to their constituents on this issue.

  • Mortgage Interest Deduction

The Senate plan keeps the mortgage interest deduction the same; however, the House plan lowers that threshold for new mortgages. Builders, real estate agents, and individuals living in areas with high real estate values are not pleased with the House’s proposed reduction in the mortgage interest deduction.

  • Tax Deductions for Corporations

You have probably heard much debate on whether the benefits of cutting taxes on corporations will “trickle down” to consumers. The House and Senate bills both intend to reduce the corporate tax rate by 20 percent. However, the House bill proposes the change for 2018 while the Senate bill does not make the reduction effective until 2019.

  • Estate Tax Deduction

The House GOP proposes in their bill to eliminate the estate tax entirely in 2024. Many critics believe this is unfairly benefiting rich families. The Senate GOP has compromised by keeping the estate tax, but increases the threshold so that the estate tax will not be paid on the first $11 million of inheritance.

Will Tax Reform Happen in 2017?

The GOP has set a tight deadline to place a tax bill on the President’s desk. However, before they can present a proposed bill to the President, they must work together to reconcile the differences between the two tax bills. A problem for the Senate is the requirement that its tax plan does not cause the deficit to increase by more than $1.5 trillion in the next ten years.

The requirement not to raise the deficit by more than $1.5 trillion over the next ten years could be a problem for Senators because President Trump wants the corporate tax cut, but a corporate tax cut is expected to increase the deficit greatly. In addition, individual Senators have proposals they want to be included in a final bill. It may be difficult to find a compromise that satisfies all parties.

Planning for Retirement in an Uncertain Environment — Talk to a Michigan Retirement Planning Attorney

At this time, no one can be certain how the proposed legislation will impact retirement and savings. However, one of the best ways to ensure that your financial future is secure is to work with a retirement planning attorney and estate planning attorney to develop a plan that protects you, your family, and your assets.

If you want to learn more about retirement planning, contact The Elder Care Firm of Christopher J. Berry, CELA. Call our office at 888-390-4360 or use the contact form on our website to schedule an appointment with a Michigan retirement planning lawyer.

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