A short time ago, the House of Representatives passed the Tax Cuts and Jobs Act by a vote of 227-205. This is a big step forward towards passing comprehensive tax reform. The bill now goes to the Senate for more consideration, where the Senate Finance Committee is expected to support its passage later this week.

Introduced on November 2, 2017, and later modified, the bill makes a number of noteworthy changes to the individual and corporate tax codes. The plan, according to the Tax Foundation Taxes and Growth Model, is a pro-growth tax plan that would increase GDP, raise wages, and create more jobs.

“The Tax Cuts and Jobs Act is a pro-growth reform of the U.S. tax code, which would make the code simpler and boost American competitiveness,” said Tax Foundation President Scott Hodge. “Lawmakers have tackled a difficult project; tax reform is not easy, but today’s passage in the House moves us one step closer to accomplishing a once-in-a-generation reform of the tax code.”

Below is a summary of the major provisions of the House version of the package.

• Individual Income Tax Rates and Brackets: Consolidates current seven income tax rates into four, while retaining the top marginal rate of 39.6 percent and including an income recapture provision which phases out the effect of the 12 percent bracket for high earners.
• Standard Deduction: Increases the standard deduction to $12,200 for single filers, $18,300 for heads of household, and $24,400 for joint filers.
• Itemized Deductions: Retains the state and local property tax deduction, capped at $10,000, while eliminating the remainder of the state and local tax deduction, except for taxes paid or accrued in carrying on a trade or business; limits the mortgage interest deduction to the first $500,000 in principal value.
• Child and Family Tax Credits: Increases child tax credit value to $1,600, with the phaseout for joint filers beginning at $230,000, while creating a new $300 per-person family tax credit for those not eligible for the child tax credit, to expire after five years.
• Treatment of Pass-Through Income: Caps the pass-through rate at 25 percent and adds a lower minimum rate, with anti-abuse rules.
• Corporate Income Tax: Cuts the tax rate to 20 percent, effective tax year 2018.
• Capital Investment: Increases the Section 179 small business expensing cap from $500,000 to $5 million, with the phase-out beginning at $20 million, and maintains current depreciation schedules for real property.
• Tax Treatment of Interest: Caps net interest deduction at 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA).
• Business Credits and Deductions: Eliminates credits for orphan drugs, energy, private activity bonds, rehabilitation, and contributions for capital, among others.
• International Income: Moves to a territorial system with base-erosion rules.
• Deemed Repatriation: Enacts deemed repatriation of currently deferred foreign profits at a rate of 14 percent for liquid assets and 7 percent for illiquid assets.
• Estate Tax: Increases exemption to $10 million, indexed for inflation, with repeal after six years.