1. Accounting 509—December 5, 2017 Analysis as of November 29, 2017
TAX CUTS AND JOBS ACT H.R. 1
Accounting 509—December 5, 2017
Analysis as of November 29, 2017

2. TAX CUTS AND JOBS ACT H.R. 1
Caution—this presentation is based on an analysis of the House and Senate versions of the bill as of November 29, 2017.
It is likely that the final version of the bill will change and some of the changes may materially affect the accompanying calculations
The following slides show the impact of the House and Senate versions of the bill on several taxpayers.
Some of the slides are based on actual individuals
Other slides are based on hypothetical taxpayers using IRS data to estimate deductions at various income levels
A few slides are based on actual examples with modified facts to illustrate who wins and loses.

3. Sample taxpayer—millennial adult living at home with parents
Single taxpayer
Recently graduated college
Has an entry level job
Parents paid for college, so taxpayer has no student loans

4. Sample taxpayer—millennial adult living at home with parents
2016 RETURN
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
26,334
ITEMIZED DEDUCTIONS
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
STD DEDUCTION
(6,300)
(12,200)
(12,000)
PERSONAL EXEMPTIONS
(4,050)
TAXABLE INCOME
15,984
14,134
14,334
INCOME TAX
1,933
1,696
1,534
AMT -
NET TAX
TAX INCREASE/DECREASE
(237)
(399)

5. Sample taxpayer—millennial adult living at home with parents
Single taxpayer
Recently graduated college
Has an entry level job
Has student loans

6. Sample taxpayer—millennial college graduate living at home with parents
2016 RETURN
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
SALARY
26,334
STUDENT LOAN INTEREST
(2,200)
ITEMIZED DEDUCTIONS
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
STD DEDUCTION
(6,300)
(12,200)
(12,000)
PERSONAL EXEMPTIONS
(4,050)
TAXABLE INCOME
13,784
14,134
12,134
INCOME TAX
1,613
1,696
1,270
AMT -
NET TAX
TAX INCREASE/DECREASE 83
(343)

7. Sample taxpayer—millennial college graduate owns his home
Single taxpayer
Graduated college five years ago
Has a job paying about $120K
Owns a home
Has itemized deductions of $17K
$7K of state income taxes

8. Sample taxpayer—millennial college graduate owns his home
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
119,141
ITEMIZED DEDUCTIONS
(17,416)
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
STD DEDUCTION
(12,200)
(12,000)
PERSONAL EXEMPTIONS
(4,050)
TAXABLE INCOME
97,675
106,941
107,141
INCOME TAX
20,266
23,935
20,985
AMT -
NET TAX
NET TAX INCREASE
3,669
719

9. Sample taxpayer—Bill & Betty Blue Collar Worker--renters with two young children
Household income $75,000
Rent their residence
Have two children under the age of 17
Claim the standard deduction

10. Sample taxpayer—Bill & Betty Blue Collar Worker--renters with two young children
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
75,000
ITEMIZED DEDUCTIONS -
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
PROPERTY TAX DEDUCTION
STD DEDUCTION
(12,600)
(24,400)
(24,000)
PERSONAL EXEMPTIONS
(16,200)
TAXABLE INCOME
46,200
50,600
51,000
INCOME TAX
6,026
6,072
5,739
CHILD TAX CREDIT
(2,000)
(3,800)
(3,300)
AMT
NET TAX
4,026
2,272
4,072
2,439
3,739
TAX INCREASE/(DECREASE)
(1,754) 46
(1,587)
(287)

11. Sample taxpayer—Bill & Betty Blue Collar Worker--renters with three young children
Household income $75,000
Rent their residence
Have three children under the age of 17
Claim the standard deduction

12. Sample taxpayer—Bill & Betty Blue Collar Worker--renters with three young children
EXISTING SITUATION
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
75,000
ITEMIZED DEDUCTIONS -
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
PROPERTY TAX DEDUCTION
STD DEDUCTION
(12,600)
(24,400)
(24,000)
PERSONAL EXEMPTIONS
(20,250)
TAXABLE INCOME
42,150
50,600
51,000
INCOME TAX
5,419
6,072
5,739
CHILD TAX CREDIT
(3,000)
(5,400)
(4,950)
AMT
NET TAX
2,419
672
3,072
789
2,739
TAX INCREASE/(DECREASE)
(1,747)
653
(1,630)
320

13. Sample taxpayer—Average Santa Clarita family--renters with two young children
Household income $90,000
Rent their residence
Have two children under the age of 17
Claim the standard deduction

14. Sample taxpayer—Average Santa Clarita family--renters with two young children
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
90,000
ITEMIZED DEDUCTIONS -
HOME MORTGAGE INTEREST
CHARITABLE CONTRIBUTIONS
PROPERTY TAX DEDUCTION
STD DEDUCTION
(12,600)
(24,400)
(24,000)
PERSONAL EXEMPTIONS
(16,200)
TAXABLE INCOME
61,200
65,600
66,000
INCOME TAX
8,276
7,872
7,539
CHILD TAX CREDIT
(2,000)
(3,800)
(3,300)
AMT
NET TAX
6,276
4,072
5,872
4,239
5,539
TAX INCREASE/(DECREASE)
(2,204)
(404)
(2,037)
(737)

15. Sample taxpayer—Average Santa Clarita family--renters with two young children
Household income $90,000
Own their residence
Have two children under the age of 17
Itemize their deductions
Itemized deductions based on averages from IRS published data for 2015 for joint returns with an adjusted gross income of between $75,000 and $90,000

16. Sample taxpayer—Average Santa Clarita family--homeowners with two young children
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
90,000
ITEMIZED DEDUCTIONS -
SALT DEDUCTION
(600)
HOME MORTGAGE INTEREST
(18,000)
CHARITABLE CONTRIBUTIONS
PROPERTY TAX DEDUCTION
(3,000)
STD DEDUCTION
(24,400)
(24,000)
PERSONAL EXEMPTIONS
(16,200)
TAXABLE INCOME
52,200
65,600
66,000
INCOME TAX
6,926
7,872
7,539
CHILD TAX CREDIT
(2,000)
(3,800)
(3,300)
AMT
NET TAX
4,926
4,072
5,872
4,239
5,539
TAX INCREASE/(DECREASE)
(854)
946
(687)
613

17. Sample taxpayer—Jack & Dianne Professional--homeowners with two young children
Married couple
Two salaries-household income of $150,000
Two children under 17
Homeowners who itemize their deductions
Itemized deductions based on averages from IRS published data for 2015
Income for 2016 and after 2023/2026 is too high to claim child credit

18. Sample taxpayer—Jack & Dianne Professional--homeowners with two young children
2016 TAXES
HOUSE BILL 2018
SENATE BILL 2018
SENATE BILL 2026
AGI
150,000
ITEMIZED DEDUCTIONS -
SALT DEDUCTION
(5,500)
HOME MORTGAGE INTEREST
(22,000)
CHARITABLE CONTRIBUTIONS
(500)
PROPERTY TAX DEDUCTION
(5,000)
STD DEDUCTION
(24,400)
PERSONAL EXEMPTIONS
(16,200)
TAXABLE INCOME
100,800
125,600
122,500
INCOME TAX
16,788
23,972
19,117
CHILD TAX CREDIT
(3,800)
(3,300)
AMT
NET TAX
20,172
15,817
TAX INCREASE/(DECREASE)
3,384
7,184
(971)
2,329

19. Sample taxpayer—George & Edna Sicko—retired homeowners with seriously ill spouse
Married couple
Retired with $90,000 of pension related income
Couple is on a fixed income
Homeowners who paid off their mortgage
Wife suffered a stroke and requires nursing care that is not covered by Medicare
Annual out of pocket medical expenses are about $69,000

20. Sample taxpayer—George & Edna Sicko—retired homeowners with seriously ill spouse
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
95,000
ITEMIZED DEDUCTIONS
HOME MORTGAGE INTEREST -
CHARITABLE CONTRIBUTIONS
(2,500)
MEDICAL EXPENSE
(59,500)
(57,000)
PROPERTY TAX DEDUCTION
(7,000)
STD DEDUCTION
(24,400)
PERSONAL EXEMPTIONS
(8,100)
TAXABLE INCOME
17,900
70,600
35,500
INCOME TAX
1,788
8,472
3,924
AMT
NET TAX
TAX INCREASE/(DECREASE)
6,684
2,136

21. Sample taxpayer—Mr. & Mrs. Stillworkinghard—Young partner in law firm
Married couple in their late 30’s
Husband and wife are attorneys
No children
Own their home
Itemize their deductions
Amounts are taken from an actual return
Taxpayers are in AMT for 2016
Senate version assumes no AMT-based on bill that came out of Senate finance Committee—final version of Senate bill contains AMT provision

22. Sample taxpayer—Mr. & Mrs. Stillworkinghard—Young partner in law firm
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL-2018
SENATE BILL-2026
AGI
610,801
STATE TAX DEDUCTION
(41,404)
HOME MORTGAGE INTEREST
(5,160)
CHARITABLE CONTRIBUTIONS
(10,744)
PROPERTY TAX DEDUCTION
(12,000)
(10,000)
STD DEDUCTION -
(24,000)
PERSONAL EXEMPTIONS
TAXABLE INCOME
541,493
584,897
586,401
INCOME TAX
155,654
167,014
161,751
AMT
4,206
NET TAX
159,860
TAX INCREASE/(DECREASE)
7,154
1,891

23. Sample taxpayer—Mr. & Mrs. Thomas Ego--Senior law firm partner—
Married couple in their late 50’s
Husband is senior attorney in a major law firm
No children
Own their home
Itemize their deductions

24. Sample taxpayer—Mr. & Mrs. Thomas Ego--Senior law firm partner—
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI
1,307,426
ITEMIZED DEDUCTIONS
STATE INCOME TAX
(43,774)
HOME MORTGAGE INTEREST
(5,160)
CHARITABLE CONTRIBUTIONS
(10,774)
(10,744)
PROPERTY TAX DEDUCTION
(10,000)
STD DEDUCTION -
(24,000)
PERSONAL EXEMPTIONS
TAXABLE INCOME
1,237,718
1,281,522
1,331,826
INCOME TAX
406,296
423,782
434,790
AMT
NET TAX
TAX INCREASE/(DECREASE)
17,486
28,494

25. Sample taxpayer—Mr. & Mrs. I. M
Sample taxpayer—Mr. & Mrs. I.M. Passive—passive investor in family business—
Assumed the same facts as the senior law firm partner except
All income comes from family business which taxpayer’s brother runs
Taxpayer does not participate in the business
All income is passive income subject to the passthrough provisions

26. Sample taxpayer—Mr. & Mrs. I. M
Sample taxpayer—Mr. & Mrs. I.M. Passive—passive investor in family business—
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
AGI (all passive)
1,307,426
QUALIFIED BUSINESS DEDUCTION
(227,492)
ITEMIZED DEDUCTIONS
STATE INCOME TAX
(43,774)
HOME MORTGAGE INTEREST
(5,160)
CHARITABLE CONTRIBUTIONS
(10,774)
(10,744)
PROPERTY TAX DEDUCTION
(10,000)
STD DEDUCTION -
(24,000)
PERSONAL EXEMPTIONS
TAXABLE INCOME
1,237,718
1,281,522
1,055,534
INCOME TAX
406,296
308,680
328,418
AMT
NET TAX
TAX INCREASE/(DECREASE)
(97,616)
(77,878)

27. Sample taxpayer—Mr. & Mrs
Sample taxpayer—Mr. & Mrs. Warbucks—passive investor in numerous businesses—
Earns $4.25 million annually from investments in several companies
Does not materially participate in those businesses
Income from those business enterprises is taxed at passthrough rate
Donated $5 million to charity
Under current law donation is limited to 50% of AGI
Under proposals donation is limited to 60% of AGI

28. Sample taxpayer—Mr. & Mrs
Sample taxpayer—Mr. & Mrs. Warbucks—passive investor in numerous businesses—
2016 TAXES
HOUSE BILL 2018
HOUSE BILL 2023
SENATE BILL 2018
SENATE BILL 2026
INCOME FROM PASSIVE INVESTMENTS
4,250,000
PASSIVE INCOME ADJUSTMENT
(977,500)
ITEMIZED DEDUCTIONS
STATE INCOME TAX
(273,692)
HOME MORTGAGE INTEREST
(6,000)
CHARITABLE CONTRIBUTIONS (subject to AGI limitation)
(2,125,000)
(2,550,000)
PROPERTY TAX DEDUCTION
(17,500)
(10,000)
ITEMIZED DEDUCTION PHASEOUT
81,887
62,337
PERSONAL EXEMPTIONS -
TAXABLE INCOME
1,909,695
1,684,000
706,500
768,837
INCOME TAX
700,710
409,300
204,312
219,896
AMT
NET TAX
TAX INCREASE/(DECREASE)
(291,411)
(496,398)
(480,814)

29. Impact of individual provisions by income level
Source:
The red bars in the $50K-$1M range are principally homeowners in states with high taxes. The blue bars for that range are people who live in states with low SALT deductions.