December 16, 2017 / 1:37 AM / 3 months ago

FACTBOX-What's in the U.S. Republicans' final tax legislation

Dec 15 (Reuters) - Republicans in the U.S. Congress released a final version of their tax bill on Friday, clearing the way for Senate and House of Representatives votes on the legislation next week.

President Donald Trump wants to sign tax legislation before the end of the year to notch the first major legislative win for Republicans since January when they gained control of the White House as well as Congress.

Here are major parts of the final bill, estimated to add about $1.5 trillion to the national debt over the next decade, or roughly $1 trillion after accounting for economic growth:


CORPORATE TAX RATE: Cuts corporate income tax rate to 21 percent from 35 percent, beginning Jan. 1, 2018.

PASS-THROUGHS: Creates a 20 percent deduction for the first $315,000 of qualified business income for joint filers of pass-through businesses such as partnerships and sole proprietorships. For income above that threshold, the legislation phases in limits that produce an effective marginal tax rate of no more than 29.6 percent.

CORPORATE MINIMUM TAX: Repeals the 20 percent federal corporate alternative minimum tax, which was set up to ensure that profitable corporations pay at least some tax.

TERRITORIAL SYSTEM: Exempts U.S. corporations from U.S. taxes on most of their future foreign profits, ending the present worldwide system of taxing profits of all U.S.-based businesses, no matter where the profits are earned.

REPATRIATION: Sets a one-time mandatory tax of 8 percent for illiquid assets and 15.5 percent for cash and cash equivalents on $2.6 trillion in U.S. business profits currently held overseas. That foreign cash pile was created by a rule that allowed foreign profits to be tax-deferred if they were not brought into the United States, or repatriated, a tax rule that would be rendered obsolete by the territorial system.

CAPITAL EXPENSING: Allows businesses to immediately write off, or expense, the full value of equipment for five years, then gradually eliminates 100 percent expensing over a three-year period beginning in year six.

CLEAN ENERGY: Leaves in place tax credits for producing electricity from wind, biomass, geothermal, solar, municipal waste and hydropower.

CARRIED INTEREST: Largely leaves in place the “carried interest” loophole that benefits private equity fund managers and some hedge fund managers, despite pledges by Republicans including Trump to close it. These financiers can now claim a lower capital gains rate on much of their income from investments held more than a year. The new legislation would extend that holding period to three years, putting the loophole out of reach for some fund managers, but preserving its availability for many.


BRACKETS: Sets seven tax brackets: For married couples filing jointly, 10 percent up to $19,050; 12 percent up to $77,400; 22 percent up to $165,000; 24 percent up to $315,000; 32 percent up to $400,000; 35 percent up to $600,000; and 37 percent over $600,000. For unmarried individuals and married couples filing separately, 10 percent up to $9,525; 12 percent up to $38,700; 22 percent up to $82,500; 24 percent up to $157,500; 32 percent up to $200,000; 35 percent up to $500,000; and 37 percent over $500,000. These brackets expire after 2025.

STANDARD DEDUCTION: Gives taxpayers a tax break without having to claim itemized deductions. For eight years beginning in 2018, the standard deduction increases to $12,700 from $6,350 for individuals and to $24,000 from $12,000 for married couples under the legislation.

CHILD TAX CREDIT: Doubles the child tax credit to $2,000 per dependent child under the age of 17, with a refundable portion of $1,400. The refundable portion allows families to lower their tax bills to zero and receive a refund for the remaining value.

PERSONAL EXEMPTION: Ends $4,050 individual personal exemption.

INHERITANCES: Increases the exemption for estate and gift taxes to $10 million from $5 million per person and indexes the new exemption level for inflation after 2011. That means even fewer Americans would pay the estate tax, but it would stay on the books.

MORTGAGES: For residences bought from Jan. 1, 2018, through Dec. 25, 2025, caps the deduction for mortgage interest at $750,000 in home loan value. After Dec. 31, 2025, the cap will revert to $1 million in loan value. Suspends the deduction for interest on home equity loans.


OBAMACARE MANDATE: Repeals a federal fine imposed on Americans under Obamacare for not obtaining health insurance coverage.

ANWR DRILLING: Allows oil drilling in Alaska’s Arctic National Wildlife Refuge. (Reporting by Amanda Becker and David Morgan; Editing by Kevin Drawbaugh)

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