The House Ways & Means Committee “Tax Cuts & Jobs Act” was just released this morning. The bill would lower the individual tax rates for low and middle income people to 0%, 12%, 25%, and 35% and retain the 39.6% rate for high-income (over $1 million) people; lower the corporate rate to 20%; and lower the small business pass through entity rate on a portion of the income to 25%.
The bill would increase (almost double) the standard deduction to $12,200 per person. Rather than using the standard deduction, taxpayers can still choose to itemize deductions. In order to pay for the tax cuts, itemized deductions would be significantly reduced . . . “special interest” deductions, such as medical deductions, would be completely eliminated, home mortgage interest deductions for newly purchased homes would be limited to loans of $500,000 or less (but existing mortgages would still be allowed the $1.1 million limit) and the loan interest on only one qualified residence could be deducted, and the deduction for property taxes would be capped at $10,000. Charitable contributions would continue to be deductible and the 50% of income limitation would be increased to 60% of income.