GOP Tax Plan Finalized
With the GOP tax bill out of the conference process, a vote for the bill will likely be held early next week. With no more further changes to be made, Americans can now decide if it really will be the Christmas gift President Trump has promised to taxpayers. What we do know is that big business is definitely feeling the love this holiday season with the corporate tax rate dropping from 35% to 21%. But how do the rest of us fare?
Here are the new rates and brackets:
- 10% – $0-$19,050
- 12% – $19,050 -$77,400
- 22% – $77,400 – $165,000
- 24% – $165,000 – $315,000
- 32% – $315,000 – $400,000
- 35% – $400,000 – $600,000
- 37% – $600,000 and above
- 10% – $0 – $9,525
- 12% – $9,525 – $38,700
- 22% – $38,700 – $70,000
- 24% – $70,000 – $160,000
- 32% – $160,000 – $200,000
- 35% – $200,000- $500,000
- 37% – $500,000 – and above
How Will the GOP Tax Bill Impact You?
With the drop in rates on taxable income, its reasonable to assume most taxpayers will have a modest tax break. However, that is yet to be determined by the new income brackets. With exemptions gone and the significant increase of the standard deduction – from the $6,350 up to $12,000 for single filers and nearly doubling the standard of married couples to $24,000 – it is probable that most taxpayers will decide not to itemize.
The bill may not be a tax break for those that usually rely on substantial deductions for tax relief and the substantial exemptions that have now vanished. Without exemptions, tax payers will weigh whether their deductions will be high enough to benefit from itemizing their taxes, or whether they should take the standard deduction. The bill will now cap state, local, and property tax at $10,000. Mortgage interest can be deducted on mortgages up to $750,000 and medical expenses will continue to be deductible.
All tax filers with eligible children will be relieved to know that the $2,000 child tax credit made it to the final bill with $1,400 being potentially refundable. This credit extends to children under 17 years of age.
And what about small business? Owners who are setup as S-corps or LLC and receive pass-through income will be allowed to deduct 20% of their pass-through income prior to applying the personal income tax rate. The Alternative Minimum Tax (AMT) will still apply to those making one million and above.
The GOP tax bill also gets rid of Obamacare’s individual mandate. This is most likely due to the failure of the GOP to repair and replace the Affordable Care Act this legislative session.
With final votes expected next week, you can find out if you are better off with Trump’s tax plan by using our Trump tax reform calculator.