7 things to know about the GOP tax plan
WASHINGTON (AP) The GOP tax plan proposes to simplify the tax system, cut taxes for the middle class, and reduce taxes on businesses and corporations.
Passage is a priority for President Donald Trump and Republicans, who are hoping for a major legislative victory to cite going into the 2018 elections.
Here are seven things the tax plan would do:
1. Change income tax rates
Would set four income tax rates: 12 percent, 25 percent, 35 percent and 39.6 percent. The 25 percent rate would start at $90,000 for married couples and $45,000 for individuals; the 35 percent rate would apply to family income exceeding $260,000 and individual income over $200,000 – which means many upper-income families whose top rate is currently 33 percent would face higher taxes. The current 39.6 percent top rate would apply to individual income exceeding $500,000 and earnings exceeding $1 million for married couples.
2. Overhaul deductions
Would nearly double the standard deduction to $12,000 for individuals and $24,000 for couples, which means significantly fewer taxpayers would itemize deductions like mortgage interest. Would limit the mortgage interest deduction for new mortgages to the first $500,000 of the loan, instead of the present $1 million limit. Would eliminate the deduction for second homes. Would eliminate the deduction for state income taxes and caps the deduction for property taxes at $10,000. But personal exemptions of $4,050 for each family member would be eliminated.
3. Allow more tax credits
Would increase the per-child tax credit from 1,000 to $1,600 and extends it to families earning up to $230,000. There’s also a new $300 tax credit for each adult in a family.
4. Cut business taxes
Would cut the top corporate tax rate from 35 percent to 20 percent. Would lower the rate for many “pass-through” businesses currently taxed at individual rates to 25 percent, though service businesses such as law firms would not be eligible.
5. Tax multinational corporations
Would establish a 10 percent tax on profits by overseas subsidiaries of U.S. corporations and seeks to prevent tax gamesmanship that has moved U.S. companies overseas. Would permit “repatriation” of profits stockpiled overseas at a one-time 12 percent rate. Would tighten tax rules on U.S. operations of foreign companies.
6. Eliminate the AMT
Would repeal the alternative minimum tax, a parallel tax structure aimed at ensuring that all people pay at least some tax. It has been criticized for excessive complexity.
7. Phase out the estate tax
Would immediately double the exemption on taxation of large estates from $11.2 million to $22.4 million and repeal the estate tax entirely after six years.