WASHINGTON (Reuters) - Republican leaders are aiming to send their tax bill to President Donald Trump for his signature by the end of the year.
To do that, negotiators from the U.S. House of Representatives and the Senate will need to iron out differences between their two versions of the legislation.
Here are some of the main points they will need to address.
The Senate bill repeals a provision of the Affordable Care Act, also known as Obamacare, that levies a penalty on taxpayers who do not purchase health insurance. The House bill did not repeal the mandate’s penalty but leaders there have indicated they would be open to doing so it if the Senate could pass it.
The House bill consolidates seven individual income tax rates into four but keeps the top rate at 39.6 percent. The Senate version keeps seven brackets and sets the top rate at 38.5 percent.
The House legislation capped at 25 percent the tax rate on 30 percent of pass-through business income, with the remaining 70 percent taxed at individual wage rates. The House excluded taxpayers in professional services, who would continue paying individual tax rates on all income. The Senate bill leaves all pass-through income in the individual system but establishes a deduction for 23 percent of pass-through income. The Senate version allows those in services professions to use the deduction if their income is less than $250,000 per year, or $500,000 for a married couple.
Pass-through businesses include partnerships and other companies not organized as public corporations, encompassing most American business enterprises from mom-and-pop concerns to large financial and real estate organizations.
The House bill repeals the deduction for medical expenses that exceed 10 percent of a taxpayer’s annual income. The Senate version retains the deduction for two years and drops the threshold to 7.5 percent of income.
The House bill repeals the individual and corporate alternative minimum taxes, or AMT, which are intended to make sure high-income taxpayers do not unduly lower their tax liabilities by combining numerous credits and deductions. The Senate bill repeals the individual AMT but keeps the 20 percent corporate AMT. By also cutting the corporate tax rate to 20 percent from 35 percent, some corporations have said this means they would not be able to use popular tax breaks such as the research-and-development credit.
The House bill limited a popular individual tax deduction to interest on home mortgages of $500,000 or less. The Senate bill would allow taxpayers to deduct interest on mortgages of $1,000,000 or less.
The House bill would allow companies to fully deduct the value of machinery and equipment and other costs for five years. The Senate bill allows businesses to do the same but then phases it out over five years.
Reporting by Amanda Becker; Editing by Bill Trott