President Trump may finally get his first major legislative victory as Congressional Republicans prepare to vote on the final tax bill this week. Find out what the final tax bill looks like and what compromises were made. If this bill passes, you can finally begin planning your tax moves for 2018.

Please click these links to refresh yourself on the details of the individual Senate tax plan and House tax plan.

2018 Tax Brackets

The Senate wins this battle (the House plan calls for 4 brackets) and the final tax bill is keeping the seven personal income tax brackets.

Here’s a breakdown of how much you can expect to pay:

Tax Bracket Single Filers Married Filing Jointly
10% $0 to $9,525 $0 to $19,950
12% $9,525 to $38,700 $19,050 to $77,400
22% $38,700 to $82,500 $77,400 to $165,000
24% $82,500 to $157,500 $165,000 to $315,000
32% $157,500 to $200,000 $315,000 to $400,000
35% $200,000 to $500,000 $400,000 to $600,000
37% $500,000 and above $600,000 and above

These updated brackets will phase out in 2025 unless renewed at that time.

Personal Exemption Rises to $12,000 and $24,000

In an effort to simplify the tax code so it fits on a postcard, only 5% of taxpayers will be able to file an itemized return in 2018. This means you need to have at least $12,000 (single) or $24,000 (married) in qualifying deductions to itemize in 2018; double the current standard deduction amounts.

You will be able to deduct charitable contributions, medical expenses, and state and local property taxes (not income tax and sales tax under 2017 tax law).

Child Tax Credit Rises

Even though families with several children may still pay more in tax than they will in 2017, the final tax plan increase the child tax credit from $1,000 to $2,000. For high-income families, the credit will begin to phase out after the first $1,400 per child.

The $2,000 child tax credit remains in effect through 2025 when Congress will need to vote to extend or revise the credit.

New Home Mortgage Deduction Up To $750,000

The home mortgage deduction for existing home mortgages remains in effect allowing you can claim up to $1,000,000 in home mortgage interest. For new home mortgages disbursed in 2018 or beyond, you can only deduct up to $750,000 in mortgage interest.

To deduct your home mortgage interest, you must file an itemized return under current tax law and the proposed tax law.

Individual Mandate Penalty Drops to $0

In 2019, you will no longer be required to pay a penalty if you don’t have adequate health care. The mandate remains in effect for 2018 because the open enrollment period has already closed.

This can be a huge budget-saver for families that currently cannot afford the monthly premiums. One fear though is that repealing the individual mandate can bankrupt the health care exchanges and make the premiums rise for those that remain on The Exchange.

AMT Remains But Exemption Doubles

The House plan tried to permanently repeal the Alternative Minimum Tax that is aimed at high-income earners. The AMT will remain in effect but the threshold doubles, making it harder to qualify for the AMT if your regular federal income tax is too small.

Corporate Tax Rate is 21%, Not 20%

Both drafts of the bill called for the corporate tax rate to go to 35% to 20%. Instead, it only reduces to 21%.  This is still a significant drop.  It puts the corporate tax rate among one of the lowest in the developed world.

Only dropping the tax rate 14 points helps offset some of the personal tax cuts. Theoretically, this will help pay for the personal cuts and not raise the federal deficit as originally projected.

Pass-Through Businesses Get a 20% Deduction

“Pass-Through” businesses like S corporations, limited liability corporations (LLCs), and sole proprietorships can deduct 20% of the first $315,000 in business income.  This inclusion was a key piece to win over some of the holdout senators that didn’t favor the first draft of the Senate bill.

529 Plans Can Now Be Used For K-12 Education

You can now use your 529 funds for up to $10,000 per year for K-12 education thanks to the final tax plan. Under current tax law, 529 plans can only be used for undergraduate, graduate, and post-graduate education. If you plan on sending your child to a private school, you can now do so with tax-advantaged investment dollars.

When Does Congress Vote on the Final Tax Bill?

If no other changes are made to the bill, the House will vote on the bill. It’s expected to be on Tuesday, December 19, 2017. If it passes the House, then the Senate is planning to hold a vote the following day. Provided it passes both chambers, President Trump plans to sign the bill into law before Christmas.

Are There Enough Votes to Pass Tax Reform?

According to senior lawmakers, it appears there are enough votes to pass the final tax bill as is. Until the votes are tallied, that observation is still speculation.

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The tax plan should pass the U.S. House because of the wide Republican majority.

Passage in the Senate is bleaker as Senator John McCain has returned to Arizona to recuperate from cancer treatments and will most likely miss the vote. The lone Republican detractor, Bob Corker, is still a “wild card” after news reports originally stated he supported the bill when it was introduced on December 15, but has since refuted those claims after the #CorkerKickback went viral over the weekend.

When Does the Final Tax Bill Take Effect?

If the final tax bill is passed into law as is, it will take effect on January 1, 2018. That means the first paycheck you earn in January will be taxed according to the new brackets.

There can still be some last-minute deals to secure passage if it looks like there won’t be enough “Yes” votes.

Summary

It finally looks like this is the real deal and this is the tax law for 2018. Business taxes will go down and will hopefully spur the economy to new heights that the lawmakers are promising. Now, it’s time to sit back and wait for the vote.

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