Tax cut timing
The House bill cuts the corporate tax rate to 20 percent from 35 percent immediately and makes the cut permanent. Individual income tax cuts are also made permanent in the House bill.
The Senate plan delays implementation of the corporate tax cut until 2019 and most of the tax cuts for individuals would expire in 2025.
To Affordable Care Act or not to Affordable Care Act
One of the biggest differences between the House and Senate plans is that Senate Republicans decided to repeal the health law’s requirement that most people purchase health insurance. This saves more than $300 billion and allows Republicans to claim success in their longstanding goal of dismantling part of the Affordable Care Act. The House bill contains no such provision, but the inclusion is not expected to cause much of a kerfuffle among the majority of House Republicans.
State and local tax deduction
The House bill eliminates the popular deduction for state and local income and sales taxes paid and only allows a deduction for property taxes, which are capped at $10,000. The provision prompted the defection of 13 House Republicans from New York New Jersey, California and North Carolina, who voted against the tax bill over concerns it would raise taxes for their constituents.
The Senate plan eliminates the so-called SALT deduction entirely.
Mortgage interest deduction
The House bill caps the deduction for mortgage interest debt at $500,000, down from the current cap of $1 million.
Senate Republicans have decided to leave the deduction alone. If that holds, it would be a big victory for real estate lobbyists, who have been vocal in their opposition to changing the deduction, but that could make the House bill even more expensive.
Republicans are united in their desire to give small businesses a tax break, but their plans differ in how to provide a tax cut. House lawmakers created a new 25 percent tax for so-called pass-through businesses — sole proprietorships, partnerships and S corporations that currently pay taxes at the individual rate of their owners. However, they erected guardrails to prevent the new rate from becoming a loophole that wealthy individuals can exploit by converting themselves into entities and flowing their income through at the rate of 25 percent.
The Senate takes a different approach, creating a new deduction for pass-through businesses along with other incentives to promote investment. The Senate bill also sets an expiration date on breaks for so-called pass-through businesses, whose owners pay taxes on profits through the tax code for individuals.
Adoption, education, health
To cut business and individual tax rates and double the standard deduction for individuals and families, Republicans had to do away with many popular tax credits and other prized deductions. The House initially eliminated a tax credit for adoptions but later restored it. It also repeals deductions for medical expenses and counts tuition waivers that are widely used by graduate students as taxable income.
In the Senate, Republicans also preserve the adoption tax credit. Unlike the House, they maintain the deduction for medical expenses and provide “education relief” for graduate students.
To repeal, or not to repeal, the estate tax
Almost all Republicans agree philosophically that the estate tax — or death tax as they call it — is unfair. But repealing it is costly, and the tax tends to only hit the very wealthy (and their heirs). House Republicans decided in their bill to double the amount of inherited wealth that is exempt from the tax to $11 million, from $5.5 million, and phase out the tax after six years. In a late amendment, they moved to delay its full repeal another year, to 2025.
In the Senate, the exemption is also doubled, but the death tax never dies.