GOP tax plan would shrink mortgage interest benefit, slash corporate tax rate
House Republican leaders on Thursday, Nov. 2
proposed legislation that would overhaul the U.S. tax code. Here's what
you need to know about it.
(Monica Akhtar/The Washington Post)
House Republican leaders on Thursday proposed
legislation that would overhaul the U.S. tax code, slash corporate and
individual income tax rates and jettison numerous tax breaks Americans
and businesses have used for years to limit their tax bills.
The release of the proposal accelerates a frantic political effort
that could impact almost every American household and business. In a
number of cases, the tax plan cuts back on tax benefits for families and
individuals while expanding tax benefits for companies.
The Tax Cuts and Jobs Act would lower the corporate tax rate from 35 percent to 20 percent
and collapse the seven tax brackets paid by families and individuals
down to four. It would create giant new benefits for the wealthy by
cutting business taxes, eliminating the estate tax, and ending the
alternative minimum tax.
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The
legislation would cut in half the popular mortgage interest deduction
used by millions of American homeowners, changing the deduction’s rules
for new mortgages.
Presently, Americans can deduct interest
payments made on their first $1 million worth of home loans. Under the
bill, for new mortgages, they would only be able to deduct interest
payments made on their first $500,000 worth of home loans.
This
change could have a particularly big impact on high-cost areas, such as
San Francisco, New York, Boston, and the Washington D.C. area, and
housing groups and lawmakers will likely try to defeat it. The bill
would allow people to deduct their local property taxes from their
taxable income, though this benefit would be capped at $10,000.
A look at what President Trump has promised Americans as it relates to his tax reform plan.
(Joyce Koh/The Washington Post)
The
bill would nearly double the amount of money not subject to federal
income tax, a tax break known as the “standard deduction.” Under the
plan, that deduction would rise from $12,700 per family to $24,000. But
this benefit would be partially offset by the personal exemption many
Americans can claim, which can be large for families with multiple
children.
The bill’s true impact on the middle class will be
difficult to immediately measure. The bill would create a new “Family
Credit” and expand the child tax credit used by working families. The
child tax credit would grow from $1,000 per child to $1,600 for each
child.
Families
would also no longer be able to deduct their state income taxes from
their federal taxable income, another change that would have a
particular impact on places like New Jersey and New York, where state
taxes are higher than in other areas. Taxpayers will be able to deduct
their property taxes up to $10,000.
Americans would no longer be
able to deduct their medical expenses or property and casualty losses,
according to a document outlining the plan.
The legislative fight over the tax bill has become
the Trump administration’s
biggest political goal, after failed attempts to repeal the Affordable
Care Act. Trump wants the legislation to pass the House and the Senate
by the end of the year, though they must resolve numerous differences.
The
bill would add $1.5 trillion to the debt over 10 years, but Republicans
believe the changes would trigger a surge in economic growth, higher
wages, and job creation.
Other changes in the bill would be far
reaching. It would, for example, make changes to college savings
programs and have new requirements for tax-exempt organizations like
churches and charities.
The
measure now moves into a contentious phase as Republican lawmakers look
to make their preferred changes to the bill while nearly all Democrats
work to block it, all while an army of lobbyists lean on Congress in a
bid to protect their preferred deductions.
Robert Bobby Darvish Platinum Lending Solutions Orange County
