Other changes proposed by the Senate and House in their tax reform plans

Posted on 20. Nov, 2017 by in 2017 Taxes

Capitol_unsplash_webIn addition to the proposed changes in tax rates and tax brackets, there are numerous proposals for changing rules that affect deductions from income to arrive at the actual income to be taxed. Both Senate and House versions eliminate personal exemptions but raise standard deductions by about twice the current. Both propose to eliminate the Alternative Minimum Tax which is raises taxes on higher income individuals by adding back items that were deducted from income thus creating an additional tax burden. Both plans would double the exemption on estates subject to taxes. The House version proposes repeal of the estate tax completely and the generation-skipping transfer tax as of 2024.

There are also several proposed changes to deductible expenses included in Schedule A, the itemized deductions. Generally, the only itemized deductions to remain would be those for charitable giving, mortgage interest, property taxes, and retirement savings. The two plans differ on the deductions for medical expenses. The Senate plans keeps that deduction. The House plan does not. Eliminating that deduction is very unpopular with seniors.

Both plans would eliminate the deduction for payment of state and local taxes. This will be very unpopular and more greatly affect those living in high tax states such as California and New York. There is disparity between the two versions as to whether businesses can deduct these expenses.

Other items that are currently allowable itemized deductions, but which would be eliminated are school loan interest, moving expenses, loss on theft, some job-related expenses, and other special deductions for things like electric vehicles. There is a myriad of changes proposed and several sources that can be accessed for specifics.

Another area very much up in the air and likely to cause vocal response, is the proposals for changes to Child and Elder care credits and deductions. The changes are in both directions, some eliminate, some propose to increase credits. The proposals are also very different in each of the versions, so keeping track of what eventually falls into a joint proposal will be interesting.

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