The Senate cleared the Republican tax overhaul early Wednesday by a vote of 51-48, a sweeping $1.5 trillion package of tax cuts and tax code revisions.  The bill went back to the House for another vote later Wednesday after a procedural glitch in the Senate, and passed by a 224-201 margin, with 12 Republicans voting against it.  That vote was a formality, and President Donald Trump is expected to sign the bill before the week is out.

Agriculture Secretary Sonny Perdue praised the passage of the legislation.  “This is a once-in-a-generation reform of the federal tax code and it comes just in time to be an eagerly awaited Christmas present for taxpayers,” he said.  “Having traveled through our nation’s heartland for most of this year, I know that the hard-working, tax-paying people of American agriculture need relief. Most family farms are run as small businesses, and they should be able to keep more of what they earn to reinvest in their operations and take care of their families. Simplifying the tax code and easing the burden on citizens will free them up to make choices for themselves, create jobs, and boost the overall American economy.  I thank President Trump for his leadership, and commend Congress for being responsive to the people.”

What’s in the bill?

Corporate tax rate

The House and Senate bills each called for 20 percent, with the Senate delaying the change by a year. They settled on 21 percent, to begin immediately, which is still a big reduction from the current 35 percent.

Individual tax rates

The Senate kept seven individual income rates, and that’s what prevailed in the final agreement.

Most people will see small reductions in the rate they pay. The bottom rate stays at 10 percent, rising to 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and finally 37 percent for income above $500,000 for individuals and $600,000 for couples. (The comparable current rates are 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent.)

The biggest change was the last one Republicans made, in which they decided to reduce the top marginal rate to 37 percent from 39.6 percent—lower than either the House or Senate originally proposed. However, these will expire at the end of 2025 to, meaning Congress will have to act before then to extend them.

Standard deduction

The standard deduction will nearly double, from $6,500 for individuals and $13,000 for families to $12,000 and $24,000, respectively. The effect of doubling the standard deduction will be limited, however, by the elimination of the personal exemption.

Individual mandate

The bill eliminates the penalty for people who go without health insurance—a step toward repealing the Affordable Care Act.  This change doesn’t take effect until 2019.

Child tax credit

The new credit will be doubled, $2,000 per child, with $1,400 of that refundable.

State-and-local tax deduction

People will be able to deduct $10,000 in state and local property, sales, or income taxes off their federal bill.  An earlier proposal would have limited the deduction to property taxes, but that was broadened in the final agreement.

Mortgage-interest deduction

Interest on mortgages up to $750,000 will be deductible under the new law, a change from the $1 million current cap. This was a compromise between the Senate and the House, which had called for lowering the cap to $500,000.

Estate tax

Full repeal couldn’t get through the Senate, so they settled on lifting the exemption from the 40 percent tax to $11.2 million from $5.6 million per individual.

Business-capital expensing

Businesses get full and immediate expensing, but the provision will begin to phase out after five years.

Medical expenses

The deduction will kick in for expenses totaling 7.5 percent of income instead of 10 percent. This provision is aimed at people who have unusually large medical bills.