The news has been full of Tax reform updates this holiday season and on Saturday, the Senate passed H.R. 1, the Tax Cuts and Jobs Act, by a vote of 51-49.
Prior to Thanksgiving, the House passed a similar bill by a vote of 227 to 205. Since both bills are not exactly the same, the House and Senate establish a conference committee with the goal of reconciling the bills for a final vote.
This somewhat quirky method of finalizing a bill often can have significant changes to the final wording. So while both bills appear similar, there are some differences that have to be ironed out.
Regardless on your stance on this issue, there are some areas that may impact you. eBay felt compelled to highlight portions that may impact individual sellers.
We strongly suggest you discuss with your accountant what these change may mean for your business.
Fundamentally, most of these changes will likely stay the same or very similar with small percentage changes here and there or adjustments in the implementation dates of the changes.
Here are eBay’s hot topics from the bills they believe will impact most sellers:
- Individual Income Tax Rates: The House bill condenses the current seven individual income brackets to four: 12%, 25%, 35% and 39.6%. The Senate bill maintains seven brackets but changes them to: 10%, 12%, 22%, 24%, 32%, 35% and 38.5%.
- Standard Deduction: Both bills double the standard deduction to $12,000 for individuals and $24,000 for couples.
- Home Mortgage Interest Deduction: The House bill limits the deduction to the first $500,000 of the loan for new home purchases (existing loans are grandfathered). The Senate bill retains the current $1 million limit.
- State and Local Taxes: Both bills end the deduction for state and local income and sales taxes but allow it for up to $10,000 in property taxes.
- Individual Insurance Mandate: The Senate bill repeals the Affordable Care Act’s individual mandate. The House bill does not.
- Corporate Tax Rates: Both bills cut the current 35% corporate rate to 20%, but the Senate bill has a one-year delay.
- Pass-Throughs: The House bill includes a 25% rate for qualifying pass-through income while the Senate bill includes a 23% deduction.
- Business Investment: Both bills include full and immediate expensing for certain qualifying business assets.
To learn more about the details of each bill, visit the House and Senate resource pages for more information. Of course, when the final bills are passed and signed by the President, we will update you the reconciled changes.