The New York Times reports today that Republican leaders in the Senate and House of Representatives have reached an agreement on a unified tax reform bill and plan to vote on the bill next week before Congress recesses for the holidays.
President Trump also gave a speech on tax reform, one of his signature agenda items for the year, from the White House. Trump said that if Congress sends him a bill to sign before Christmas, “Americans will see lower taxes beginning in February, just two short months from now,” citing an estimate from the Internal Revenue Service (IRS), as Fox News reported.
There were matters of enormous contention for real estate in the bills that passed the House and Senate — including proposals making the capital gains exclusion tax more difficult and removing state and local tax deductions (SALT). Fortunately, The Times reports that SALT will stay up to $10,000:
The agreement drops the corporate tax rate to 21 percent from the current 35 percent rate and will go into effect in 2018, rather than 2019, as the Senate bill originally called for, according to a senior Republican congressional aide. The bill also allows individuals to deduct up to $10,000 in state and local taxes, split between property taxes and either income or sales taxes paid. That move is intended to alleviate the concerns of House Republicans, particularly those from California, over the bill’s treatment of the state and local tax deduction.
CNN published an article on Wednesday night elaborating other details of the compromise bill:
- The corporate rate would be reduced to 21%, from 35%. That is an additional point added from the 20% originally proposed in the House and Senate versions. It would take effect in 2018.
- The top individual tax rate would be set at 37%, down from the 39.6% proposed in the House and 38.5% in the Senate.
- The State and Local Tax deduction will be expanded, beyond just property taxes, to include income tax. It would be capped at $10,000.
- The corporate alternative minimum tax, included at the last minute in the Senate version, would be fully repealed.
- The individual alternative minimum tax would remain, but the threshold would be tweaked to exclude any individual under $500,000 or family below $1 million.
- The mortgage interest deduction threshold — dropped to $500,000 in the House and left untouched in the Senate — would be set at $750,000.
- The rate for pass-through income — business entities like s-corporations and partnerships that pay taxes through the individual side — would be determined by a 20% deduction, 3% lower than the Senate version.
- The estate tax exemption would be doubled, but the tax would not be repealed entirely, as it was in the House proposal.
- The Obamacare individual mandate to have health insurance would be repealed.
- A House provision that proposed taxing graduate school tuition is not included in the final deal.
The entire industry will be closely watching the final bill and its vote. (It’s likely to easily pass the GOP-majority Congress).
More as we get it.