Republicans have released the final version of their tax bill. This post will focus on what I think you should know. If you have any questions, please feel free to comment.
The most important thing you need to know is that almost all of the benefits promised individuals and families expire at the end of 2025. A summary of the bill’s provisions produced by Paul Ryan’s office ignores this critical fact. On the other hand, all of the tax cuts for corporations are permanent.
The second most important thing you need to know is that this bill changes the rate of inflation used to calculate the value of things like the tax brackets. Inflation will now be calculated using the Chained Consumer Price Index (Chained CPI). The Chained CPI grows at a slower rate than does the Consumer Price Index. Over time, this will result in people winding up in higher tax brackets faster than they would if the rate of inflation wasn’t changed.
I will now list the provisions you need to know about. Below the list I will give specifics about some of them.
- The seven tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
- The Standard deduction Nearly doubles to $12,000 for single filers and $24,000 for married couples filing jointly.
- Only $10,000 of local taxes can be deducted.
- The child tax credit expands to $2,000. Only 1,400 of which is refundable.
- There is a $500 tax credit for non child dependents.
- For new mortgages, only $750,000 will be deductible.
- The Medical expense deduction will be available for those whose medical expenses are at least 7.5% of adjusted gross income in 2018 and 2019. Beginning in 2020, medical expenses of at least 10% of adjusted gross income will be deductible.
- The penalty for not having health insurance is repealed beginning in 2019.
- The exemption amount for the alternative minimum tax has been increased.
- The amount associated with the estate tax has been doubled to 11,200,000 dollars for an individual.
Here are the seven tax brackets under the Republican tax bill in 2018. Let’s begin with single filers.
| Bracket | Beginning of bracket | End of bracket |
|---|---|---|
| 10% | $0 | $9,525 |
| 12% | $9,525 | $38,700 |
| 22% | $38,700 | $82,500 |
| 24% | $82,500 | $157,500 |
| 32% | $157,500 | $200,000 |
| 35% | $200,000 | $500,000 |
| 37% | $500,000 | $500,000+ |
Here are the brackets for married couples filing jointly.
| Bracket | Beginning of bracket | End of bracket |
|---|---|---|
| 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 | $600,000+ |
The reduced brackets expire at the end of 2025.
Currently, the top bracket is 39.6 percent.
Deductions and Exemptions
While Republicans are bragging that their bill temporarily nearly doubles the standard deduction, they aren’t telling you that the personal exemption (currently $4,050) has been eliminated.
The doubling of the standard deduction also expires at the end of 2025.
Child and Dependent Tax Credits
The child tax credit is doubled two $2,000. Only $1,400 of which is refundable. Refundable tax credits are important because if the value of the credit is greater than what a tax filer owes, the government refunds the difference. So, the refundable portion of the tax credit puts money in the pockets of working families with children who pay little to no income taxes. The child tax credits begin phasing out at $200,000 for a single filer and $400,000 for married couples filing jointly.
There will be a $500 tax credit for dependents that aren’t children. In other words, caring for your sick mother or father will qualify you for a $500 tax credit.
Mortgage Deduction
The Mortgage deduction is reduced from $1,000,000 to $750,000 for all new home purchases. The current $100,000 deduction offered to those who take out an equity loan against their home is eliminated.
State and Local Tax Deductions
Currently, you can deduct all property taxes, sales taxes, and income taxes. Under this bill, you can deduct up to $10,000 of local taxes. Your $10,000 deduction can be a combination of your property taxes and either your sales taxes or local income taxes. You can’t deduct your property taxes, sales taxes, and local income taxes.
I still say that the planned deficit expansion is a “tax” that will have to be paid. They really are increasing all our taxes, even though the part of the tax load they address right now looks “rosy” to some people. And making the business taxes non-adjustable throws the future tax payments on the American Middle Class. Really, this seems very unethical to me. If they are really going to raise taxes, they need to be honest about it up front and tell us that they are sticking it to us one way or the other, and not just talking about the way we save on the one and stay silent on paying on the other.
Don’t think u expained it that well.
Maybe u could explain it so we can understand it.