It's a big week in Washington, with Senate Republicans aiming to push through their massive tax overhaul plan.
The Senate plan diverges in a number of areas from the tax bill passed by the House of Representatives 12 days earlier. While there could be a flurry of amendments and changes ahead of a full Senate vote, here’s how the current Senate proposal could affect you:
Medical expenses. Taxpayers would still be allowed to deduct medical and health care expenses exceeding 10 percent of their income. The income threshold to take the deduction increased from 7.5 percent to 10 percent in 2017. Nearly three-quarters of tax filers who claim the medical expense deduction are age 50 or older and live with a chronic condition or illness, and 70 percent of filers who claim this deduction have incomes below $75,000. (The House bill would repeal the medical expense deduction.)
Health care premiums. By ending the Affordable Care Act provision requiring most Americans to have health insurance, the Senate bill would cause health insurance premiums for millions of older Americans to surge. People ages 50 to 64 would face average premium increases of up to $1,500 in 2019 as a result of the bill, according to a study by AARP’s Public Policy Institute. (The House bill does not include this Affordable Care Act provision.)
Medicare.The Senate plan would cost about $1.5 trillion over the next decade. Absent additional congressional action, under a 2010 law known as Pay-as-You-Go, a projected deficit of that amount would trigger automatic spending cuts in many mandatory federal programs, including Medicare. Individual benefits — and premiums, deductibles and copays — would remain the same, but the reduction in spending could have a major impact on patient access to health care. (The House bill also would increase the deficit by at least $1.5 trillion over the next decade.)
Tax brackets. The bill would revamp individual income tax brackets, lowering the top rate to 38.5 percent and setting other brackets at 10 percent, 12 percent, 22 percent, 24 percent, 32 percent and 35 percent. The Senate would sunset the new brackets after 2025. (The House bill also would revamp the tax brackets, but to different rates.)
Standard deductions. The Senate plan would ends personal exemptions, currently $4,050 for each taxpayer and each dependent claimed. Instead, standard deductions would increase from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples. The Senate plan would sunset the increased deductions after 2025. (The House plan would also eliminate personal exemptions and raise standard deductions.)
Deductions for taxpayers 65 and older. The Senate plan would maintains the added standard deduction for taxpayers 65 and older. (The House plan would repeal this deduction.)
State, local and property taxes. Federal deductions for state and local taxes would no longer be allowed. (The House would allow deductions of up to $10,000 of local property taxes.)
Mortgage interest.Homeowners would still get to deduct interest on mortgages of up to $1 million. (The House would cap deductible interest on a primary home mortgage of up to $500,000.)
Student loan interest. The Senate plan would continue to allow taxpayers to deduct up to $2,500 annually in student loan interest payments. (The House would repeal this deduction.)
Alternative minimum tax.The Senate bill would repeal this tax, which generally hits high-income earners, but would revive the alternative minimum tax after 2025. (The House proposal also would abolish this tax.)
Home equity loans. Interest on home equity loans — popular among millions of borrowers for the tax break — would no longer be deductible. (The House plan also would eliminate this deduction.)
Home sellers. Individual filers would continue to get up to $250,000 and joint filers up to $500,000 tax free from the sale of a home, but the bill would require sellers to live in the property five of the eight years before the sale, up from the current requirement of two of the last five years. This provision would sunset after 2025. (The House plan shares the same provision.)
Chained consumer price index. Tax provisions that are indexed annually for inflation would be indexed using a chained consumer price index (CPI). Compared to the current measure of inflation, chained CPI would subject more income to higher tax rates through bracket creep. Tax values that are recalculated for 2018, such as the bracket thresholds and standard deduction, would be indexed by chained CPI beginning after Dec. 31, 2018. Other indexed values in the code would be indexed by chained CPI beginning after Dec. 31, 2017. (The House would adopt the same measure of inflation for the tax code.)
Some of these provisions could change this week before the full Senate vote. If the Senate passes the tax bill, it would still need to settle the differences between its measure and the House bill — or the House would have to accept the Senate version without changes — before a single piece of legislation could be sent to President Trump.