Senate Republicans unveiled a tax plan on Nov. 9 which, while broadly following the outline of the House version, chops business taxes and makes major adjustments to the individual tax system.
While the two bills share key core principles, the release of the Senate bill reveals large structural and technical differences in approaches to tax reform. Both would reduce the corporate rate to 20%, provide over $1 trillion in individual rate cuts, offer a mechanism for a reduced rate on pass-through income, and shift toward a territorial tax system with a deduction for dividends from foreign corporations. But the individual rate cuts are achieved in very different ways and there is a surprising lack of overlap in many revenue-raising provisions.
Key differences in the Senate bill version include:
What are the major differences in the Senate tax reform bill? Download our detailed comparison.
- One-year delay in the corporate rate cut until 2019
- Top individual rate reduced to 38.5%
- Deduction for qualifying pass-through income instead of reduced rate
- New limit on using losses from a pass-through business
- Completely different approach to preventing base erosion in the international tax rules
- Retention of the estate tax
- Higher limit on mortgage interest deduction
- Deeper cut in state and local tax deduction
We break down the Senate bill to provide a detailed summary of the differences in key provisions. Our analysis is organized into six main focus areas so you can easily locate the provisions of most interest to you:
- Corporate and business
- Pass-through entities
- Compensation and benefits
- Tax-exempt organizations
While there is no guarantee tax reform will ultimately be enacted, Republicans are moving quickly to make comprehensive tax reform a reality. Now is the time for businesses to carefully assess their situation and implement comprehensive tax planning strategies.
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