In 2018, single taxpayers will deduct $6,500, and married couples will deduct $13,000. Then, taxpayers can add in exemptions — $4,150 for each qualifying person, including oneself. For a single person, this comes out to $10,650. For a hypothetical two-parent home with two kids, it would come out to $13,000 plus four times $4,150, or $29,600.
A single taxpayer would deduct $12,000, a head of household would deduct $18,000, and a married couple would deduct $24,000. However, none will tack on any additional exemptions.
So that single person would deduct $12,000 and not $10,650. The single parent would deduct $18,000 and not $17,650. Meanwhile, the two-parent home with two kids would get a $24,000 deduction now, not $29,600. However, they could also get a bigger child tax credit.
In other words, the total of the standard deduction plus exemptions would be smaller for some families with multiple children than it was before.
A nearly doubled standard deduction would also mean fewer taxpayers itemizing their deductions, which Republicans argue would make it easier to do their taxes.
The Senate proposal would, like the House bill, double the standard deduction and remove personal exemptions.
Taxpayers deduct a set amount — $4,150 per qualifying child — from their taxable income. Then, they apply the child tax credit by subtracting up to $1,000 per child from the final tax bill. (The total amount depends on a tax filer’s income; the credit phases out as income gets higher.)
Employees can exclude the value of up to $5,000 in employer-provided dependent care assistance programs from their income. In these programs, employers might reimburse employees for a certain amount of childcare into a flexible spending account, for example.
There is also an adoption tax credit of $13,750 per child.
Taxpayers would not apply exemptions for their children. They would, however, apply a larger child tax credit, of up to $1,600 per child. This could help families make up for the loss of exemptions (as explained above). There is also an additional $300 credit for each parent and nonchild dependent.
The House bill also initially eliminated the $5,000 exclusion for dependent care assistance and repealed the adoption tax credit, but later amendments restored both.
Taxpayers would not apply exemptions but would benefit from a child tax credit of up to $2,000. The Senate plan also includes a non-refundable $500 credit for non-child dependents.
The Senate plan also maintains the current dependent care exclusion and adoption credit.
Taxpayers can contribute up to $18,500 in pretax income to tax-preferred retirement accounts like 401(k)s for tax year 2018.
Despite some talk initially of lowering the limit on 401(k) contributions, this would not change.
Despite some talk initially of lowering the limit on 401(k) contributions, this would not change.
Tax filers who itemize deductions can deduct different types of state and local taxes from their taxable income on their federal tax returns.
Itemizers could still deduct property taxes, but not other types of state and local taxes, like income or sales tax. Additionally, they would be able to deduct only up to $10,000 in property taxes.
The Senate bill now also now allows taxpayers to deduct up to $10,000 for local property taxes.
Taxes must be paid on any estate with assets worth more than $5.6 million for tax year 2018 (or $11.2 million per married couple). The tax rate on those assets ranges from 18 percent to 40 percent, depending on the size of the estate. Right now, only a tiny sliver of the very wealthiest estates are subject to this tax.
The estate tax exemption would immediately double, meaning individual estates would be taxed only on assets of more than $11.2 million for tax year 2018. Additionally, after six years, the estate tax would be eliminated entirely.
The estate tax exemption would double, meaning individual estates would be taxed only on assets of more than $11.2 million for tax year 2018. However, unlike the House bill, it would not eventually eliminate the estate tax.
Sole proprietorships, as well as a few other types of businesses (not all of them small), are taxed through the individual income tax code and at individual income tax rates. (For this reason, they are often called “pass through” businesses, as their income gets passed on to the owner, who files the taxes with her income tax returns.)
Some pass-through income would be taxed at a lower rate of 25 percent. However, the GOP has added in measures to discourage higher-income workers, who would pay a rate up to 39.6 percent, from trying to take advantage of the 25 percent rate for their wage income.
For example, the 25 percent rate would not apply to all types of pass-through income. The bill would tax income from a labor-intensive business, such as an accountant or a performer, at individual rates.
The Senate proposal would not create a lower rate for pass-through income, but it would allow pass-through-business owners to deduct some of their business income. In addition, the new deductions would expire at the end of 2025.
Homeowners who itemize their deductions can deduct the interest paid on up to $1 million of their mortgage principal.
The deduction would be limited to up to $500,000 of new mortgages, not $1 million. Also, mortgages on second homes would no longer be deductible.
The current $1 million cap would remain unchanged.
Taxpayers can deduct the cost of out-of-pocket medical expenses, if the total cost exceeds 10 percent of the taxpayer’s adjusted gross income.
The deduction would be repealed.
The deduction would remain in place.
A variety of tax policies benefit current students and college graduates. Taxpayers whose colleges or universities give them tuition reductions, often called “tuition waivers,” can exclude that amount from their income.
Workers may also exclude up to $5,250 in employer-provided education assistance from their taxes. Taxpayers may also deduct some tuition and student loan interest payments from their taxes. In addition, tax credits including the American Opportunity Tax Credit, Hope Scholarship Credit, and Lifetime Learning Credit help students afford their education.
The House plan would eliminate the Hope Scholarship and Lifetime Learning credits but also expand the American Opportunity Tax Credit.
In addition, the other exclusions listed here, such as for tuition waivers and employer-assisted education assistance, would be eliminated.
Materials released by the Senate Budget Committee promised “education relief for graduate students,” and a summary from the Joint Committee on Taxation mentioned no changes to the tax credits or tuition-waivers discussed in the House bill. However, it does say the Senate proposal would eliminate the deductability of “work-related education.”
This chart was last updated on Dec. 4.