Comparing the House and Senate Tax Cuts and Jobs Act

On November 2, 2017, the House Ways and Means Committee released their comprehensive tax reform proposal, Tax Cuts and Jobs Act (H.R. 1). On November 9, the Senate Finance Committee unveiled their own tax proposal. It is widely expected that both bills will be considerably amended as they go through the legislative process.

Although there will be a lot of discussion and changes to the tax proposals, here is what we know so far:
CCIM Institute’s Priority Issues

CurrentHouse Bill (H.R. 1)Senate Plan
1031 Like Kind ExchangesAllows investors to defer capital gains taxes on the exchange of like-kind properties.Eliminates the exchange for personal property but preserves the exchange for real estate.Eliminates the exchange for personal property but preserves the exchange for real estate.
Corporate Tax Rate35% corporate tax rateEffective 2018, a 20% flat corporate tax rate and 25% flat rate for personal service corporations.Effective 2019, a 20% flat corporate tax rate and eliminates the special rate for personal service corporations.
Section 179D Deduction for Energy Efficient Commercial BuildingsSet to remain expired as of December 31, 2016Not AddressedNot Addressed
Pass-through Businesses
Taxed same as income with the current top marginal rate 39.4%Effective 2018, 70% of income taxed as wages and 30% taxed as business income (25%) with the ratio adjusted based on capital investment.Effective 2018, 17.4% deduction for non-wage income, but only if taxable income is below $75,000 ($150,000).
Carried InterestAllows a share of an investment’s profits paid to the investment manager exceeding the amount that the manager contributes to the partnership.Retained but a 3-year hold period is required to qualify.Retained but a 3-year hold period is required to qualify.
State and Local Tax DeductionAllows deductions for sales, income and property taxProperty tax deduction is capped at $10,000. Repeals itemized deduction of state and local income and sales tax.Repeals itemized tax deduction for state and local taxes for individuals but allows a deduction for sales and property taxes incurred in business.
Mortgage Interest Deduction$1,000,000 cap$500,000 cap for new mortgages but disallows any deduction for interest on home equity loans.Retains the $1,000,000 cap but disallows any deduction for home equity loan interest.
Estate and Gift TaxesEstate Tax exemption is currently $5,490,000Effective 2018, increases the estate exemption amount to $11,200,000. Repeals the estate taxes for decedents dying after 2024. Lowers the federal gift tax from 40%-35% effective 2025.Effective 2018, increases the estate tax exemption amount to $11,200,000. Does not repeal the estate tax in the future.
Corporate Alternative Minimum TaxAlternative tax rate to calculate a corporation’s tax liability.Effective 2018, would repeal the corporate AMT. For 2019-2021, if a taxpayer has AMT credit carryforward, the taxpayer could claim a refund of 50% of remaining credits and could claim all remaining credits for 2022.Effective 2018, would repeal corporate AMT. Allows the AMT credit to offset the taxpayer’s regular tax liability for any tax year. For 2018-2020 the AMT credit would be refundable equal to 50% of the excess of the minimum tax credit for the tax year over the amount of the credit allowable for the year against regular tax liability and 100% beginning in 2021.
Historic Tax Credit20% credit to certified historic structures.Repeals the credit with a transition rule for expenditures incurred through a 24-month period beginning 180 days after January 1, 2018.Repeals the 10% credit for pre-1936 buildings and reducing the credit for qualified rehabilitation expenditures to certified historic structures to 10%.
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