1. Tax Rate Reductions
RESULT: The new law provides generally lower tax rates for all individual tax filers.
The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
The final bill retains the current-law maximum rates on net capital gains
(generally, 15% maximum rate but 20% for those in the highest tax bracket; 25% rate on “recapture” of depreciation from real property).
2. Removal of Cost Recovery (Depreciation)
RESULT: The final bill retains the current recovery periods for nonresidential real property (39 years), residential rental property (27.5 years) and qualified improvements (15 years).
3. Exclusion of Gain on Sale of a Principal Residence
The Senate-passed bill would change the amount of time a homeowner must live in their home to qualify for the capital gains exclusion from 2 out of the past 5 years to 5 out of the past 8 years.
RESULT: The final bill retains current law (2 of 5 years)
4. Mortgage Interest Deduction
The House bill sought a reduction to $500,000 from $1 million.
RESULT: The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit.
5. State and Local Tax Deductions
Both the House and Senate bills sought to eliminate the state and local income tax deduction.
RESULT: Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000.
6. Moving Expenses Deduction
The House-introduced bill would have eliminated the moving expense deduction for all filers, including military.
RESULT: The final bill repeals moving expense deduction and exclusion, except for members of the Armed Forces.
7. Rental Income Subject to Self-Employment Tax
The House-introduced bill would subject rental income to self-employment taxes.
RESULT: This provision was dropped from the House (and final) bill.