NEW YORK (CNNMoney) - The House Republican tax bill revealed on Thursday offers a first look at how House Republicans want to reshape the tax code.
Here's a rundown of key provisions that would affect individuals:
Reduces income tax brackets: There are seven federal income tax brackets in today's code that are taxed at 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent.
The House bill consolidates those into four brackets:
- 12 percent (on the first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly)
- 25 percent (starts at $45,000 for individuals; $90,000 for married couples)
- 35 percent (starts at $200,000 for individuals; $260,000 for married couples)
- 39.6 percent (starts at $500,000 for individuals; $1 million for married couples)
The plan nearly doubles the standard deduction: The bill raises today's standard deduction for singles to $12,000 from $6,350 currently; and it raises it for married couples filing jointly to $24,000 from $12,700.
That would drastically reduce the number of people who opt to itemize their deductions, since the only reason to do so is if your individual deductions combined exceed the standard deduction amount.
Eliminates personal exemptions: Today you're allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. The House bill eliminates that option.
For families with three or more kids, that could mute if not negate any tax relief they might enjoy as a result of other provisions in the bill.
Expands child tax credit: The bill would increase the child tax credit to $1,600, up from $1,000, for any child under 17.
But that $600 increase won't be available to the lowest-income families if they don't end up owing federal income taxes. That's because unlike the first $1,000, the extra $600 won't be refundable. Refundable means that if your federal income tax bill is zero, you get a check from the government because of the credit.
The bill would let more people claim the child tax credit. The income level where the credit starts to be phased out would increase to $115,000 for single parents, up from $75,000 today, and to $230,000 for married parents, up from $110,000.
Creates two new family credits: The bill would create two different $300 tax credits, but they would be in effect only for five years and would not be refundable.
The first would be for nonchild dependents -- for instance, any son or daughter over 17 whom you're supporting, an ailing elderly mother or an adult child with a disability. The second is a credit for each spouse if they file jointly (or, in the case of single parents, the head of household).
So a family of four -- two parents, a 12-year-old daughter and an 18-year-old son -- could reduce their tax bill by $2,500, said Elaine Maag, a senior research associate at the Urban Institute. They would claim the $1,600 child tax credit for the daughter, the $300 nonchild dependent credit for the son and a $300 credit for each parent.
The income thresholds governing these two new credits are the same as for the child tax credit.
Eliminates tax exclusion for dependent care assistance accounts: Today some employers provide parents the opportunity to save up to $5,000 of their income in a dependent care flexible spending account. That money is excluded from the parent's taxable income. The House bill would repeal that exclusion. The dependent care FSAs are disproportionately used by higher-income families, Maag said.
Repeals state and local tax deductions, but preserves property tax break: The original GOP proposal was to fully repeal the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes. But it was met with strong opposition from lawmakers in high-tax states and cities.
So Brady made a concession. The House bill restores an itemized property tax deduction for property taxes up to $10,000.
Limits deductible mortgage interest: The bill preserves the mortgage deduction as currently structured for existing mortgages, but it curbs it for mortgages on newly purchased homes going forward. You would only be able to claim a deduction for interest you pay on mortgage debt up to $500,000, down from $1 million today.
The percent of filers who claim the mortgage interest deduction would fall to 4 percent from 21 percent currently because the standard deduction would nearly double, according to Tax Policy Center estimates.
Repeals many other deductions: These include those for medical expenses, tax preparation fees, alimony payments, student loan interest and moving expenses.
Leaves 401(k)s alone: After strong pushback from President Trump, among others, the House bill did not propose lowering the cap on pre-tax contributions from $18,000 today.
Repeals the Alternative Minimum Tax: The AMT, originally intended to ensure the richest tax filers pay at least some tax by disallowing many tax breaks, most typically hits filers making between $200,000 and $1 million today.
Those who make more than that usually find they owe more tax under the regular income tax code, so end up having to pay that tab instead.
Tax experts often note the AMT no longer meets its original purpose and further complicates an already complex tax code. But it's been kept on the books because it raises a lot of revenue. Repealing it would reduce revenue by $440 billion in the first decade, according to Tax Policy Center estimates.
Repeals the estate tax: The estate tax today affects just 0.2 percent of all estates, and only those with more than $5.5 million in assets (or $11 million if you leave a spouse behind).
Nevertheless, Republicans are still pushing to repeal it. The House bill, however, has delayed the repeal until 2024, and in the meantime doubles the exemption levels.
Small business impact
While small businesses are anxious for a tax cut, they mostly want to know for sure what is going to happen so they can manage their business the best way possible.
Derek Schroyer, who just started his small business in January, said uncertainty about the tax code is stressful for people like him.
"I would like to be able to have less regulations and less taxes so I can know that I can hire people and not have to do all the work myself," Schroyer said.
Schroyer doesn't know yet whether the Republican tax plan will make it through Congress, but he is hopeful they will get something done to help him grow his business.
Wealth manager Joe Krier said helping small business owners helps everyone.
"If we can have a tax cut that stimulates economic activity, makes it easier for lower and middle class families to operate, then everybody wins," Krier said.
Krier says one element to the plan is to allow small business owners to write off their investments right away, instead of having to wait.
That's good news for businessmen like Schoyer, who says he will put to use any break he can get.
"I would like businesses to be taxed less. I think that's good for America in general," Schoyer said.
What's best for America is what Congress will be debating in the coming weeks.
The president has said he wants this done by Christmas. But the earliest we would probably see the impact from changes would be April of 2019.
CNN's Ashley Killough, Deirdre Walsh and Phil Mattingly contributed to this report.
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