The tax reform bills approved by both the Senate and House are poised to alter your tax return in significant and minor ways — affecting which credits you can claim, what deductions are applicable, and the amount you ultimately owe.
However, they present differing perspectives on crucial aspects. Expect to hear more about these discrepancies in the coming days as the Senate and House work towards merging the two bills into a single piece of legislation for a final vote in both chambers.
Here’s a breakdown of the key differences in how they address individual tax filers.
1. Expiration of individual provisions
Senate: Most provisions are set to expire in 2025.
House: Most provisions are made permanent.
2. Health insurance mandate
Senate: Eliminates the mandate by reducing the penalty to $0.
House: Retains the mandate.
3. Tax brackets and rates
Senate: Maintains seven tax brackets while revising the rates, generally lowering them. The proposed rates are: 10%, 12%, 22%, 24%, 32%, 35%, and 38.5%.
House: Proposes four brackets: 12%, 25%, 35%, and 39.6%.
4. Standard deduction
Senate: Increases the standard deduction to $12,000 from $6,350 for single filers; $18,000 from $9,350 for heads of household; and $24,000 from $12,700 for joint filers.
House: Raises it to $12,200 for single filers; $18,300 for heads of household; and $24,400 for joint filers.
5. Child tax credit
Senate: Increases the credit to $2,000 from $1,000; however, the additional $1,000 would not be refundable, meaning that many low- and middle-income filers would likely not benefit from this increase.
Allows the credit for children under 18, an increase from the current limit of 17, but this change is applicable only until 2025.
The full credit would be accessible to higher-income families.
House: Raises the credit to $1,600 from $1,000, with the additional $600 also non-refundable.
Makes the credit available to higher-income families.
6. New family credit
Senate: Establishes a temporary $500 credit for dependents who are not children.
House: Introduces a temporary $300 personal credit for parents and non-child dependents.
7. Mortgage interest deduction
Senate: Preserves the existing deduction.
House: Lowers the maximum mortgage debt eligible for interest deduction to $500,000 from $1 million.
8. Medical expense deduction
Senate: Retains this deduction and temporarily decreases the adjusted gross income threshold necessary to qualify for it. Currently, taxpayers can deduct medical expenses exceeding 10% of their adjusted gross income; this would be lowered to 7.5%.
House: Abolishes this deduction.
9. Teacher’s deduction for classroom supplies
Senate: Increases it to $500 from $250.
House: Repeals this deduction.
10. Tuition waivers for graduate students
Senate: Retains the existing waiver.
House: Eliminates the waiver.
11. Deduction for student loan interest
Senate: Maintains this deduction.
House: Abolishes this deduction.
12. Alternative Minimum Tax (AMT)
Senate: Retains it but increases the exempt amount until 2025, after which exemption levels would revert to current law.
House: Repeals the AMT.
13. Estate tax
Senate: Expands exemptions, raising them to $11 million for individuals and $22 million for couples.
House: Doubles the exemption limits for six years and then repeals the estate tax in 2024.
