As the House and Senate negotiate over the newly proposed tax bill before the winter break, it remains unseen as to whether this bill will be the Grinch to everyone’s season or if it will bring taxpayers some early gifts.

The Senate passed its version of the tax bill in an early morning rush on Dec. 2, and while it follows many of the same principles of the House bill – lowering taxes on individuals and businesses, simplifying itemized deductions and increasing child credits, for example – it varies in the details in several key ways.

Congress is now tasked with reconciling the two versions of the legislation. In the meantime, advisors should keep a close eye on these five provisions from the Senate’s latest proposal.

The Number of Tax Brackets Won’t Change But the Rates Will

One of the original provisions in the House bill would consolidate seven income-tax brackets to just four. But in the Senate’s version, the number of tax brackets stays the same and the rates and income levels change.

Current rates: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%

Senate’s Proposed Rates: Single Income Levels Married Filing Jointly Income Levels
10% Up to $9,525 Up to $19,050
12% $9,525-$38,700 $19,050-$77,400
22% $38,700-$70,000 $77,400-$140,000
24% $70,000-$160,000 $140,000-$320,000
32% $160,000-$200,000 $320,000-$400,000
35% $200,000-$500,000 $400,000-$1,000,000
38.5% $500,000+ $1,000,000+

While this change won’t prove dramatic for many clients, it behooves advisors to be aware of the new income limits and tax bracket percentages. Tax bracket jumps could impact Roth conversions, for example.

State and Local Tax Deductions

The legislation would eliminate existing federal tax breaks for state and local income or sales taxes, but preserve a property-tax deduction capped at $10,000. The plan would penalize clients in many densely populated states that rely on state income and sales taxes, like New York, California, New Jersey and Illinois.

Standard Deduction Is Doubled, Personal Exemptions Removed

Like the House bill, the Senate proposal increases the standard deduction from $6,350 to $12,000 for individual filers and from $12,700 to $24,000 to married couples filing jointly. This change would not only make filing taxes easier, it would also encourage middle class clients not to focus on increasing their itemized deductions by taking bigger mortgages, having larger real estate taxes, or donating more to get a larger reduction in income taxes.

Meanwhile, both proposals also remove the personal exemption. For 2017, the exemption is $4,050 per person, meaning a joint-filing couple with two dependents received an exemption of $16,200 (four people times $4,050). With this exemption being completely removed, the increase in the standard deduction will be negated for some larger families. For taxpayers who can claim more than five exemptions in their household, for example, this can now mean an increased income tax bill.

Non-Professional Service S-Corps Will Have a Reduced Tax Rate

Starting in 2019, non-professional service S-Corps will see their tax rate decrease from a maximum of 35% to 20%. This change won’t affect many self-employed clients who have set up S-Corps to manage their own service-based businesses (take lawyers, accountants and consultants, for example). But for those who have businesses that aren’t service-related, this change could put significant tax dollars back into their pockets. For many advisors, they will see the bottom lines of their client’s company balance sheet swell, causing them to revisit discussions of retirement planning or taking money out of companies to increase a client’s personal balance sheet. Coupled with a provision that makes equipment purchases 100% deductible, up from 20% deductible per year, this lower tax rate could lead some businesses to reinvest for future growth and expansion.

How Real Estate Sales Could Change

Homeowners in states where real estate prices have dramatically increased have enjoyed the fact that if they lived in their home two out of the last five years, they could sell it and not pay capital gains on the profit.

Both the House and Senate bills lengthen that holding period to include five out of the last eight years. Along with other changes to real estate expense deductibility, realtors have been predicting that this change could result in a slowdown in the real estate market, as homeowners hold onto their homes for longer and buy smaller houses because they won’t be able to deduct as many expenses.

For advisors, they should be aware of these new rules when their clients are looking to move. A mistiming of this rule — especially in a home that has experienced rapid appreciation — could result in a larger tax bill.

FIFO Becomes Mandatory For Stock Investors

A piece of the Senate’s tax bill that has been publicly chastised by various custodians, including Betterment and TD Ameritrade, is the rule that will force all investors to abide by the FIFO cost-basis rule when it comes to selling stock holdings.

This will mean that stockholders will not be able to choose which tax lots to use when selling investments. Instead, they will have to sell their oldest (or “first”) holdings first. This rule could translate into dramatically higher tax bills for clients who have highly-appreciated stock. In a letter to Congress, TD Ameritrade offered an example of an investor who would owe taxes on a stock sale, even though they have incurred significant unrealized losses in their portfolio from this same stock holding.

For advisors, this rule change will not affect those who invest in mutual funds, where the “average cost basis” rule was kept in place. However, for advisors whose client taxable portfolios are made up of single positions or have highly appreciated stock, this should further emphasize the importance of tax and charitable planning in their investment management services.

This article originally appeared on On Wall Street.

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