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Story highlights

NEW: The deal would lower the top tax rate to 37%, a push by House Republicans

The deal also drops the corporate tax rate to 21%

(CNN) —  

House and Senate Republicans have struck a tentative deal on a tax bill Wednesday, a major step in ensuring the GOP majority is on its way to deliver an overhaul of the US tax system by the holidays.

According to two GOP aides, Republicans struck a deal in principle that will meld together the House and Senate tax deals and put the parties on a path to vote as soon as next week. Aides say there are still smaller issues to work out, but Senate Republicans will discuss remaining issues at their conference-wide lunch Wednesday and see how their rank-and-file members react.

Lawmakers have been working for more than a week to find a way to combine two very different tax bills.

Here’s what Republican negotiators as of Wednesday evening had in the plan:

  • The corporate rate would be reduced to 21%, from 35%. That is an additional point added from the 20% originally proposed in the House and Senate versions. It would take effect in 2018.
  • The top individual tax rate would be set at 37%, down from the 39.6% proposed in the House and 38.5% in the Senate.
  • The State and Local Tax deduction will be expanded, beyond just property taxes, to include income tax. It would be capped at $10,000.
  • The corporate alternative minimum tax, included at the last minute in the Senate version, would be fully repealed.
  • The individual alternative minimum tax would remain, but the threshold would be tweaked to exclude any individual under $500,000 or family below $1 million.
  • The mortgage interest deduction threshold – dropped to $500,000 in the House and left untouched in the Senate – would be set at $750,000.
  • The rate for pass-through income – business entities like s-corporations and partnerships that pay taxes through the individual side – would be determined by a 20% deduction, 3% lower than the Senate version.
  • The estate tax exemption would be doubled, but the tax would not be repealed entirely, as it was in the House proposal.
  • The Obamacare individual mandate to have health insurance would be repealed.
  • A House provision that proposed taxing graduate school tuition is not included in the final deal.

These deductions will remain untouched (they were all repealed in the House bill, left alone in the Senate bill). Of note, repeal of these deductions were some of the most controversial elements of the House plan. None will be repealed in the final version.

  • Medical expense deduction
  • Tax-free graduate school tuition waivers
  • Private activity bonds
  • Student loan interest deduction
  • Teacher spending deduction

The news of a deal came just hours after Senate Minority Leader Chuck Schumer called on Republicans to hold off on a tax bill until newly-elected Alabama Sen. Doug Jones, a Democrat, was seated in January.

This story has been updated and will continue to update with additional developments.