Lawmakers work to reconcile House, Senate tax bills

WASHINGTON -- Significant differences separate the massive tax packages passed by the House and Senate on estate taxes, health care and a deduction for home mortgage interest, though Republican leaders are confident none is insurmountable.

Republicans are trying to pass the biggest rewrite of the tax system in more than 30 years.

"We're looking forward to getting a final bill to the president's desk, soon," Senate Majority Leader Mitch McConnell, R-Ky., said Monday.

Both versions would cut taxes by about $1.5 trillion over the next decade while adding billions to the deficit. But they take different approaches.

"I don't see anything here that is a deal-killer," said Jon Traub, a former staff director for House Ways and Means Republicans who is now at Deloitte Tax. "Having come this far, I don't know why they wouldn't be able to finish."

The differences and how each issue likely will play out:

Personal income-tax rates

The House bill condenses seven brackets to four: 12 percent, 25 percent, 35 percent and 39.6 percent. The Senate measure retains seven brackets but changes them and reduces the top bracket from 39.6 percent to 38.5 percent.

The Senate bill ends the reductions in 2026; they're permanent in the House version.

The Senate bill has been criticized because the tax cuts for individuals are temporary while the tax cuts for corporations are permanent.

Home mortgage interest deduction

The House version limits the deduction to interest paid on the first $500,000 of a loan for new home purchases. The Senate retains the current $1 million ceiling.

Alternative minimum tax

The House bill repeals the individual and the corporate AMT, which is designed to ensure higher-earning people pay at least some tax. The Senate bill scales back the individual AMT and keeps the corporate AMT.

Inheritance tax

Under current law, when someone dies, the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals, $11 million for couples. The House bill initially doubles those limits and then repeals the entire tax after 2023. The Senate bill doubles the limits but does not repeal the tax.

Health law mandate

The Senate bill repeals the mandate that requires the vast majority of Americans to buy health insurance; the House version does not.

The Senate likely will prevail because many House Republicans support repealing the mandate.

Pass-through businesses

Millions of U.S. businesses "pass through" their income to individuals, who then pay personal income taxes on those earnings.

The House bill taxes many of them at 25 percent, plus creates a 9 percent rate for the first $75,000 in earnings for some smaller pass-throughs.

The Senate bill lets people deduct 23 percent of their business earnings and then pay at their personal income tax rate on the remainder.