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After weeks of comparing different tax reform proposals and debating how to best meet various goals, the Congressional Conference Committee released their combined version of the two Tax Cuts and Jobs Act proposals that were passed by the House and Senate. This version of the bill more closely resembles the Senate version, and includes tax rate cuts for individuals, corporations and pass-through businesses, an elimination of many forms of tax deductions, larger exemptions from the estate tax and Alternative Minimum Tax (AMT), and numerous changes affecting multi-national businesses.

While steps were made to simplify our federal tax system, this proposal seemed to fall short of where previous versions landed. For example, rather than repealing the estate tax and AMT, this proposal simply expands the exemptions. Fewer taxpayers will be affected by them, but with AMT specifically, many will still have to go through the calculations to be sure. Several of the exemptions and deductions that were repealed in the original versions found their way back into this latest version. And most importantly, most of the changes affecting individual taxpayers are scheduled to expire after 2025. While the expectation is that many of those will eventually be permanently extended, it does set us up for another fiscal cliff-like showdown, similar to what occurred at the end of 2012.

The next step for this proposal is for both the House and Senate to vote on whether or not to approve it. It appears that Republicans in both houses have enough votes to pass this without any Democratic support, and that is expected to happen in the next few days. From there it will go to President Trump who is expected to sign it into law.

The following are highlights of many of the provisions that will affect individuals and business owners. For a complete summary of all provisions in the bill, please visit http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf. Unless specifically stated, all provisions would take effect beginning in 2018.

Changes to individual tax rates and brackets

The combined proposal mostly adopts the Senate proposal by sticking with 7 tax brackets but changing the rates and the income levels to which they apply. One notable change is that the top rate would be lowered to 37% from 39.6%.

In general, marginal tax rates would fall at all levels. The exception would be income for couples between $400,000 and $424,950 (and singles between $200,000 and $424,950), where the marginal rate would increase from 33% to 35% in 2018. This proposal did not include the “bubble tax” that was part of the House bill, which would have eliminated the benefit of the lowest brackets for those at high income levels.

Also, because the brackets for married couples are almost always twice that of a single person, this marks a significant reduction of the marriage penalty. Two single individuals who make the same income would pay the same total tax individually as they would if they were married until their individual incomes reach $500,000. At that point, they would begin paying more tax as a married couple than as two single individuals. For 2017, that increase in tax begins once their individual incomes reach roughly $77,000.