26 THE QUEENS COURIER • DECEMBER 7, 2017 FOR BREAKING NEWS VISIT WWW.QNS.COM
The House and Senate Tax Bills
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BY JOHN SAVIGNANO, CPA
If your company sponsors a 401
(k) pThe House and Senate tax
bills are a lot alike. Both plans
have similar big-picture themes:
Reduce individual rates, pare
back some write-offs, slash the
corporate rate to 20%, give tax
preferences to individual owners
of pass-through businesses and
move to a territorial tax regime
for multinationals.
However, there are also marked
differences. We’ll delve into a few
of the major ones. The Senate
wants temporary individual cuts.
This includes lower rates, higher
standard deductions and child
credit, repeal of the alternative
minimum tax, breaks for self-employeds
and owners of passthrough
firms, estate tax changes.
The House plan has four individual
tax rates, ranging from
12% to 39.6%. The Senate proposes
seven rates, starting at 10% and
topping out at 38.5%. It’s a close
call, but it wouldn’t surprise us to
see fewer rates than under current
law.
There’s huge disagreement over
the popular state and local tax
write-off. The Senate wants to
fully ax it, while the House has
come up with a compromise: End
income tax write-offs and cap the
deduction for real property taxes
at $10,000. We think the Senate
will cave when both chambers
iron out their differences.
Other itemizations are also
in dispute: The home mortgage
interest write-off. The House
would nix the break for second
homes and lower the $1-million
ceiling on home acquisition
indebtedness to $500,000. These
proposals aren’t included in the
Senate bill, but there’s a chance
they could make it into any final
tax legislation.
The write-off for medical costs.
The House would do away with
this break. The Senate would
keep it. We continue to think this
deduction will survive in the end.
Turn to the estate tax. The
House wants to double the lifetime
exemption until 2025, when
it would then fully repeal the
tax. The Senate would preserve
the tax but double the lifetime
exemption. Look for the Senate
proposal to prevail here.
The treatment of owners of
pass-through firms is in flux.
The House bill applies a 25% top
rate to a portion of a person’s
share of income from proprietorships,
LLCs, S corporations and
partnerships. The Senate calls
for a new 17.4% deduction for
pass-through income. Both versions
contain lots of limitations
and antiabuse rules that have
drawn the ire of powerful lobbying
groups and at least one GOP
senator. We anticipate that these
provisions will be substantially
revised in any tax package.
John Savignano is a partner
with Savignano Accountants &
Advisors located at 47-46 Vernon
Blvd., Second Floor, in Long
Island City. If you have any questions
or require additional information,
please call John at 718-
707-0955.
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