House tax plan would lower caps on 401(k)s, cut state and local deductions

(ABC News) — The details of the House Republican tax bill have continued to be intensely debated even over the last 24 hours, but there are two key areas of compromise between House Republican leaders and the White House, according to two sources familiar with the draft bill.

401(k)s – The White House, as the president tweeted, wanted to keep the current annual maximum for tax-free contributions ($18,000); House Republicans wanted to lower the limit to $2,400. The bill, as of this morning, would lower what individuals may contribute tax-free to their 401(k)s, to an amount about halfway between the current limit and what House Republicans initially proposed.

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Deduction for state and local taxes – The latest draft would eliminate the deduction for state and local income taxes. But it would retain the deduction for local property taxes.

Estate taxes – The latest draft of the bill would retain the elimination of the estate tax. Although there had been intense internal debate as recently as Tuesday night about phasing it in — increasing the maximum amount exempt from the tax (currently $10.9 million for married couples) for the first five years and then eliminating it — sources said the latest draft would call for the elimination of the estate tax.

That said, the White House and House Republican leaders anticipate the Senate will not go along with getting rid of the estate tax and expect the proposed elimination will be negotiated away in conference.

 

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