House Unveils Tax Cut Plan

A sweeping tax overhaul unveiled by House Republicans Thursday would affect millions of older Americans by eliminating several popular tax deductions, rewriting the income tax brackets for individuals and cutting corporate taxes.

House Speaker Paul Ryan, R-Wis., said the Tax Cuts and Jobs Act would boost economic growth by cutting the corporate tax rate from 35 percent to 20 percent. The measure would also decrease taxes for many low- and middle-income workers. A typical family of four with a median annual household income of $59,000 would save $1,182, he said.

But the plan would also eliminate the medical expense deduction, which would mean a tax increase for many older Americans. “Eliminating the medical expense deduction amounts to a health tax on millions of Americans with high medical costs — especially middle-income seniors,” said AARP Executive Vice President Nancy LeaMond. “AARP is strongly opposed to this provision.”

Other major provisions of the bill:

• The number of income tax brackets would collapse from seven to four. The new brackets would be set at 12 percent, 25  percent  and 35 percent, with the top rate of 39.6 percent unchanged.
  
• Standard deductions would nearly double, from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples. But personal exemptions would be eliminated.
  
• Mortgage interest deductions would be capped at mortgages of $500,000, compared with the current $1 million, although the tax benefits of existing loans would not be affected.
  
• The ability of taxpayers to deduct state and local taxes would be sharply curtailed. The deduction for state and local income and sales taxes would disappear, and property owners could write off up to $10,000 in state and local property taxes.
  
• Child tax credits would rise to $1,600 from $1,000.
  
• A new $300 credit would apply for each parent and adult dependent, but the credit would end in 2022.
  
• The alternative minimum tax, which affects mostly high-income households, would be abolished.
  
• Beginning in 2024, the estate tax would be eliminated. Until then, as much as $11 million of an estate would be tax exempt, up from $5.5 million.