Senate and House Republicans announced agreement Friday on the first major tax overhaul in more than 30 years—a $1.5 trillion bill that would touch most Americans in some way, affecting not only take-home pay but also the cost of healthcare, home and business ownership, having a family, and more. 

Among the major changes, the legislation would significantly shrink the deduction of state and local taxes and reduce the mortgage-interest tax deduction, mainstay tax breaks for decades. The bill also would significantly weaken the Affordable Care Act by eliminating a penalty for not having health insurance, a major tenet of the law designed to hold down premiums by keeping participation high.

The bill keeps seven tax brackets but makes them more generous to some earners and less generous to others. And it nearly doubles the standard deduction and pares back or eliminates numerous individual tax breaks, including the personal exemption.

Republicans say the joint legislation, if it becomes law, would spur greater economic growth and give middle-income Americans a needed tax break. Opponents say that the legislation is a giveaway for corporations and the wealthy and that any economic growth over time won’t be enough to offset the loss of tax receipts.

The legislation would drop the corporate tax rate to 21 percent and make fewer people subject to the alternative minimum tax, a supplemental income tax designed to prevent wealthy taxpayers with many deductions from avoiding paying taxes.

For the wealthy, the bill drops the top tax rate and also shields a greater percentage of an inheritance from the current 40 percent estate tax. And the legislation gives a big tax break to owners and investors in certain types of businesses.

Consumer Reports is still poring over the 1,097 pages of the Republican plan, which was crafted with no input or agreement from Democrats. Here are the main takeaways about how it would affect individuals, and the short-term and long-term winners and losers, if the bill becomes law.

Winners Over the Long Term

The tax bill makes some changes permanent and others temporary. Permanent changes would benefit these groups:

• Corporations. Their tax rate would drop to 21 percent from a top 35 percent rate—a decline of 40 percent.

• Taxpayers who take the standard deduction. About 70 percent of Americans fall into this category. A near doubling of that deduction to $12,000 for individuals, $18,000 for heads of household, and $24,000 for joint filers—combined with some more generous tax brackets and rates—would mean less tax taken from most individuals’ and families’ paychecks, according to multiple analyses.

• Wealthy earners. A maximum 37 percent tax rate would apply to couples filing jointly with taxable income of $600,000 or more, and single people and heads of household with taxable income of $500,000 or more (the current top rate is 39.6 percent). The new top rate also would kick in at a higher income level than under current tax schemes, creating even more savings for this group. Several studies, including one from the Institute of Taxation and Economic Policy, a self-described nonpartisan research organization, show top earners would get the lion’s share of the benefit from the bill’s tax cuts.

• Passive investors and some self-employed people. Some people who have structured their businesses as sole proprietorships, partnerships, and other special entities—also known as pass-through businesses—would get a significant tax break on a portion of qualifying income.

A study by the nonpartisan Tax Policy Center found that the change would mainly help people who make significant income through hedge funds, private equity firms, real estate development, and similar businesses—not small-business people. 

The language specifically excludes professionals in health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, and brokerage services.

“This is not for people who work for a living,” says Rob Seltzer, a certified public accountant based in Los Angeles. “It’s for investors and people who have passive income.”

• Higher-paid folks with good accountants. The bill’s favorable focus on business could encourage those with means to characterize at least a portion of their salary or interest income as business income. For instance, a research paper authored by 13 tax experts notes, certain wealthy individuals might be able to incorporate themselves and pay tax on interest income at the corporate rate of 21 percent, not the top 37 percent they’d pay as individuals.

“It will benefit those in the upper-middle class and above who can afford accountants and lawyers to wade through the regulations and plan around them,” says Robert Charron, a CPA and partner in charge of tax at Friedman, a regional accounting firm based in New York City.

Winners for a Few Years

Many individual breaks are designed to “sunset” after a few years unless a future Congress votes to extend them or make them permanent. Here’s who benefits in the interim:

• Families with dependents—until 2026. Families whose income qualifies them for a child tax credit would get more per child: $2,000, vs. $1,000 under the current law. A portion—$1,400—would be refundable. That is, taxpayers could get up to $1,400 back from the government, even if they owed no tax. The bill raises the income limit for the credit, so families with higher incomes can qualify. As in current law, families would have to earn $2,500 to qualify; the credit applies only to children under age 17. 

Families also could claim a new, $500 “family” tax credit for nonchild dependents. That credit is nonrefundable.

The bill requires that both parent and child must have Social Security numbers in order for the family to get the refundable child credit. That’s a departure from current law, which allows parents who don’t have Social Security numbers to supply individual tax identification numbers instead. 

• People with expensive medical bills—until 2019. For tax years 2017 and 2018, taxpayers could deduct medical expenses that exceed 7.5 percent of their adjusted gross income. After that they could deduct in excess of 10 percent, as they can by law today. 

More on Taxes

• Families saving for a disabled person—until 2026. The bill would increase the amount that could be contributed to tax-favored ABLE savings accounts, designed to save for the needs of disabled adults and children. Contributions could also make the beneficiary of an ABLE account eligible for the saver’s credit, intended to supplement savings for lower-income people.

• Folks subject to the alternative minimum tax—until 2026. The first $70,300 of an individual’s income that could be subject to the AMT is exempt from the tax; that’s a rise from $54,300 currently. Married couples filing jointly would get an exemption on the first $109,400 of income, compared with $84,500 today. 

• Heirs of wealthy people—until 2026. Surviving spouses would continue to pay no estate tax. The estate tax exemption would double; currently nonspousal heirs would avoid a 40 percent tax on the first $5.49 million inherited from one individual and $10.98 million inherited from two.

Losers for a Few Years

• Residents of states with high taxes and real-estate values—until 2026. A maximum $10,000 deduction for state and local taxes could be split between property taxes, and either state income or sales taxes. That’s compared with an unlimited deduction in the current tax code.

That $10,000 ceiling appears to apply to both singles and married couples filing jointly, though married people filing separately could deduct a maximum of only $5,000 each. People who run home businesses could still deduct the portion of state and local taxes, including property tax, that applies to that business.

The bill also prevents taxpayers from prepaying their state income taxes this year to avoid paying more in 2018. It says nothing about prepaying property taxes.

Interest on up to $750,000 in mortgage debt on a newly purchased primary home could be deducted; that’s a drop from the $1 million allowed now. That change, coupled with the changes to deduction of state and local taxes, could slow or stall real estate markets in some high-tax, high-priced areas, predicts Lawrence Yun, chief economist at the National Association of Realtors.

“In places like Connecticut, New York, and New Jersey, you’ll begin to see home buyers hesitate or scale down which properties they purchase,” he says. “If prices fall, it will mean less in local property taxes, which could have an effect on services.”

• Folks with home-equity loans and lines of credit—until 2026. The interest on those loans would no longer be deductible, regardless of what it’s used for.

Losers in the Long Term

• Those without private health insurance. The bill effectively eliminates the Affordable Care Act’s individual mandate by reducing the penalty for not having insurance to $0. That could nudge an estimated 13 million Americans out of state healthcare marketplaces established by the ACA, according to an estimate (PDF) by the nonpartisan Congressional Budget Office. They could voluntarily end up with no health insurance. Many analysts have suggested that the exit of those individuals would drive up premium prices for those who remain in the marketplaces by an average of 10 percent a year.

• People planning to divorce. Alimony payments would no longer be deductible. That change would affect divorce agreements finalized or modified after 2018.

• The working poor. The tax bill gives a temporary break to low-earning people, applying the lowest, 10 percent rate to more of their taxable income (individuals would get an additional $200 in income taxed at 10 percent; joint filers would get an additional $400 taxed at that rate). But people in the lowest quintile of earnings would pay more fairly soon, according to a preliminary analysis by the nonpartisan Tax Policy Center, based in Washington, D.C. Elaine Maag, a senior research associate, says that’s in part because of a new, permanent way of calculating inflation that would move taxpayers up to a higher tax bracket more quickly than under current law. 

Lower-income families also might not benefit as much from the increase in the child tax credit as higher-income families might. That’s because only $1,400 of that $2,000 credit is refundable, providing money back even to a wage-earner who owes no tax. Those with lower taxable incomes might zero out their tax liability before using up the entire credit.

“Low- and middle-income families will get small benefits in the early years of the legislation, but they’ll have to pay more by 2027,” Maag says. “For them, the tax bill is mostly a lot of moving parts without a lot of impact.”

• All of us, by 2026. Tax breaks for individuals would mostly expire. An analysis of an earlier Senate bill draft by the nonpartisan Joint Committee on Taxation found that by 2019, taxpayers making $30,000 or less would pay more, as a group, than they do now. By 2025, the last year in which the bill’s measures would be in place, only those making $1 million or more would still be paying less in taxes. The following year, all taxpayers would pay more than we would pay if the current tax structure stayed the same. 

What Happens Next

Senate and House tax-bill conferees—all Republican—signed on to the bill today. It’s scheduled for votes in both houses of Congress next week. President Trump says he wants to sign the legislation before Christmas.

The Congressional Budget Office still has to weigh in on its estimates of the bill’s costs and benefits. A recent one-page Treasury report says the cuts, along with other as-yet-unenacted measures, would spur growth averaging 2.9 percent annually, making up for the $1.5 trillion that Senate and House versions of the bill have been projected to cost. But another study by the Joint Committee on Taxation, which studies the budget impact of Congressional legislation, projects more limited growth of 0.8 percent annually.

The bill’s opponents maintain that more limited growth could require Congress to make cuts elsewhere in the government, including Medicaid, Medicare, and Social Security.