Skip to content

The House Bill Would Mean a Tax Hike for Millions of Seniors. Learn More

 

Senate Republicans Roll Out Tax Plan

Medical expense and senior deductions would be preserved, but homeowners could lose state and local tax benefits

Senate releases details about its tax overhaul bill

Getty Images

The House could vote on its tax bill as early as next week, and the Senate Finance Committee will begin considering its measure Monday.

Senate Republicans unveiled their tax overhaul proposal Thursday with provisions that would preserve some important benefits for older Americans that are excluded from the plan headed to the floor of the House of Representatives.

The Senate proposal maintains the medical expense tax deduction, a key benefit for older Americans and others with high health care expenses. The measure — which allows taxpayers to deduct out-of-pocket medical expenses that exceed 10 percent of their income — was used by 8.8 million taxpayers in 2015, more than half with a household member over 65. 

In another departure from the House plan, the Senate proposal maintains the added standard deduction for taxpayers 65 and older, which is $1,250 for individuals and $2,500 for couples.  

Still, millions of Americans would lose a big tax break under the Senate version, which would scrap state and local tax deductions, hitting residents of high-tax states such as New York, New Jersey, California and Illinois especially hard. The House proposal also would eliminate state and local income tax deductions but would allow homeowners to deduct up to $10,000 in property taxes.

The plans also diverge on mortgage interest deductions. The Senate proposal retains current interest deductions on home loans up to $1 million; the House measure keeps that deduction for existing mortgages, but limits them on new home loans greater than $500,000.

Republicans in both chambers say the tax cuts in their plans would mainly help low- and middle-income workers. House Speaker Paul Ryan, R-Wis., says the House plan would save a typical family of four with a median household income of $59,000 nearly $1,200 a year. Senate Finance Committee Chairman Orrin Hatch, R-Utah, says the Senate proposal would save a similar-sized family earning $73,000 a year about $1,500.

But Democrats have called Republican tax reform measures giveaways to the wealthy and corporations. And the nonpartisan Tax Policy Center says the House plan would eventually raise taxes for about 25 percent of Americans.

Both GOP plans slash the top corporate tax rate from 35 percent to 20 percent, although the House proposal cuts the rate in 2018, the Senate’s in 2019.

Other similarities and differences in the House and Senate versions include:

  • Tax brackets. Both proposals would revamp individual income tax brackets.The House would establish four — down from the current seven — keeping the top bracket at 39.6 percent and setting new tax rates at 12 percent, 25 percent and 35 percent. The Senate plan would lower the top rate to 38.5 percent and set other brackets at 10 percent,12 percent, 22.5 percent, 25 percent, 32.5 percent and 35 percent.
  • Standard deductions. Both plans would end personal exemptions, currently $4,050 for each taxpayer and each dependent they claim. Instead, standard deductions would rise from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples.
  • Alternative minimum tax. Both plans would repeal this tax, which generally hits high-income earners.
  • 401(k) plans. Both plans would preserve these retirement plans, which allow workers 50 and older to contribute up to $24,000 a year in pretax income.
  • Student loan interest. The Senate plan would keeps a tax credit that allows taxpayers to deduct up to $2,500 annually in student loan interest. The House plan would eliminate it.
  • Child tax credits. The Senate proposal would increase the child tax credit to $1,650, up from the current $1,000. The House plan would raise the credit to $1,600.
  • Estate taxes. Both plans would raise the threshold on what is a taxable inheritance from $5.5 million to $11 million. The House plan would repeal the estate tax after 2023; the Senate would keep it.
  • Other tax breaks and credits. Unlike the Senate plan, the House would end tax credits, worth up to $7,500, on plug-in electric vehicles. The Senate measure would maintain the alimony deduction; the House proposal would kill it. The House plan also would eliminate the moving expenses deduction, while the Senate would allow some deductions for the military.

The House could vote on its tax bill next week, and the Senate Finance Committee will begin considering its measure Monday.

“The House will pass its bill, the Senate will pass its bill and then we will get together and reconcile the differences, which is the legislative process,” Ryan told reporters this week. “And that’s how this process will continue.”

Join the Discussion

0 | Add Yours

Please leave your comment below.

You must be logged in to leave a comment.

Next Article

Read This