While Ben Franklin once said nothing is certain but death and taxes, aspects of the latter appear all but certain to change next year. With both branches of Congress passing tax-reform legislation, now it’s up to a committee of negotiators from the House of Representatives and the Senate to reconcile the differences between their two bills. It seems there is a goal to get the final bill in front of President Trump in just a couple of weeks, before Congress breaks for the holidays.

The Senate and House versions of the “Tax Cuts and Jobs Act” do have differences that are still up for debate.

One of the main differences that may affect all US citizens is the tax brackets.

Currently, there are seven tax brackets for individuals: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The Senate bill also has seven tax brackets, which cap out at 38.5%. For most income brackets, there would be a reduction. Meanwhile, the House bill has only four brackets: 12%, 25%, 35% and 39.6%.

On the corporate side, the House bill cuts the corporate tax rate to 20% (from 35% currently), starting in 2018. The Senate bill also drops the rate to 20%, but it would not take effect until 2019.

There are several other nuances that are beyond the scope of this article, and we encourage you to do your own research on the subject. As our area of focus is on investing, we would like to highlight a few aspects of tax reform that stand out to us. Not only in terms of how investments are taxed, but also in terms of changes to how individuals save and invest for college, retirement or some other goal.

Saving for College

For new parents, college represents a major expense that requires long-term planning. Both the House and Senate bills contain some changes related to 529 plans, which are vehicles used to save for college. Currently, money invested in these plans grows free of federal income tax when withdrawn for qualified higher education expenses such as tuition, books, and room and board (when attending at least half time). Depending on where you live, there may be state tax benefits, too.1 We did not see any major changes in regard to the tax treatment of these plans in either bill. Given the skyrocketing cost of a college education, we find it encouraging to see saving for college remains a priority.

There were some proposed tweaks, however. Under the House and Senate bills, an individual may make a contribution to an “ABLE” account by transfer of the balance of a 529 plan. The Senate bill’s provision would expire at the end of 2025. An ABLE account is a tax-preferred savings account for persons with special needs. So, if you have an ABLE account and a 529 plan, you can roll the 529 plan balance into the ABLE account, as long as you don’t exceed ABLE account contribution limits.

Additionally, the House bill allows an unborn child to be a named beneficiary of a 529 Plan.

The Senate’s bill contains an amendment further broadening the scope and use of 529 savings plans. These plans would be able to be used for elementary and secondary schools (in addition to college), and would include private schools as well as home-schooling and tutoring.

We welcome changes that make it easier to save for educational purposes, including the broadening of the contributions to lower educational levels and for wider purposes.