Late Friday evening, Congressional Republicans released the final version of their tax reduction and simplification plan.  Although many elements match the House and Senate versions, there are some differences worth noting.

I should point out, though, that the following is a broad summary – I haven’t read all 1,100 pages of the proposed law.  Furthermore, this summary only covers the changes for individual filers, not corporations or partnerships.

Lastly, you should talk to your accountant about how the changes affect you.

Brackets & Rates

While the number of brackets stayed the same, unlike the House bill, the rates and dollar amounts changed. The table below shows the data for married couples, filing jointly (as is all data in today’s article).

Deductions & Exemptions

Currently, the standard deduction for joint filers is $13,000.  Taxpayers also qualify for exemptions of $4,150 for themselves and their family members.  For example, a two-parent home with two kids would get a $13,000 deduction with $29,600 in exemptions.

Under the new law, the standard deduction for joint filers nearly doubles to $24,000, although there are no exemptions.  The elimination of exemptions expires in 2025.

State and Local Tax Deductions

Today, filers can itemize deductions for different types of state and local taxes from their taxable income on their federal returns.  The new law still allows taxpayers to deduct state and local taxes, but only up to $10,000.

Mortgage Interest Deduction

Right now, homeowners who itemize deductions can deduct interest pain on up to $1 million of their mortgage principal.  Under the new law, the deduction would be limited to $750,000 for new mortgages (current loans are grandfathered).  It allows homeowners to deduct the interest on first and second homes.  This portion of the law expires after 2025.

Medical Expense Deductions

Current law allows taxpayers to deduct the cost of out-of-pocket medical expenses if the medical expense exceed 10 percent of the taxpayer’s adjusted gross income (AGI).

The new law lowers the floor to 7.5 percent of AGI for the next two years and then reverts to 10 percent in 2020.

Child Tax Credits

Currently, as noted above, parents get an exemption of $4,150 per child and can also apply the child tax credit of $1,000 per child from their final tax bill (there are a lot of details here that I am not covering since this is a broad summary).

Although parents will lose the exemptions as noted above, the child tax credit doubles to $2,000 per child.  The bill creates an additional $500 credit for non-child dependents and keeps the adoption tax credit.

401k Accounts

Taxpayers can contribute up to $18,500 in pretax income into tax-preferred retirement accounts.  Although there was some discussion that pretax contributions would go away or the limits would be reduced, there are no changes to 401k plan contributions.

Estate Taxes

Today, estates worth more than $11.2 million for married couples are taxed up to 40 percent (again, I’m going light on details in this summary).  The new law doubles the exemption to $22.4 million for couples.  In 2026, this portion of the law sunsets and reverts back to current law.

A Few More Things

At this point, there a few things that I am still unsure about despite a lot of Googling last night.

First, I read that 529 college savings plan money could be used for K-12 private education costs but I wasn’t able to confirm that.

Second, I believe that the new law doesn’t require the use of ‘first in, first out’ tax treatment for capital gains.

Third, there is a nice calculator courtesy of the New York Times, although it doesn’t cover a lot of the details.

Lastly, I was unable to get this summary onto a postcard.  I saw Treasury Secretary Mnuchin on Fox News Sunday with Chris Wallace and he said that they are still pursuing the post card option.