There are a lot of talks these days about taxes says, William D King.
President Donald Trump and the Republicans in Congress have vowed to cut taxes, simplifying the tax code and making it easier on businesses and individuals. Whether this push will culminate in changes to the nation’s tax laws remains to be seen.
But there is one proposal that has been put forward: The Tax Cuts and Jobs Act (H.R.1), which was unveiled by House Republicans earlier this month.
This plan would simplify the tax law significantly. Reduce income tax rates for most Americans, double standard deductions, limit itemized deductions (except those for mortgage interest and charitable contributions), repeal personal exemptions. Repeal head of household status ($1,300 per year savings), repeal the Alternative Minimum Tax, repeal Obamacare’s 3.8 percent surtax on net investment income. Reduce the number of tax brackets from seven to four (12%, 25%, 35%, and 39.6%). Increase the standard deduction to $24,000 for married couples filing jointly ($12,000 for single filers), up from $12,700 this year), and also eliminate nearly all other deductions. Except those for mortgage interest and charitable contributions explain William D King.
What does that mean for you? Read on to find out.
– If you are single with no kids or dependents, your first $12,000 in earned income would be taxed at 12%; every dollar over that amount would be taxed at 25%. The standard deduction for single filers would be $12,000.
– If you are married with no kids or dependents, your first $24,000 in earned income would be taxed at 12%; every dollar over that amount would be taxed at 25%. The standard deduction for married couples filing jointly would be $24,000.
– If you are married with one child and no other dependents, the first $28,000 in earned income would be taxed at 12%; every dollar over that amount until it reaches $60,000 would be taxed at 25%. The remainder — anything above $60,000 –would fall into the next bracket of 35%. The standard deduction for a married couple with one child filing jointly is set at $28,000.
– If you are married with two children and no other dependents, the first $32,000 in earned income would be taxed at 12%; every dollar over that amount until it reaches $90,000 would be taxed at 25%. William D King says the remainder- anything above $90,000 -would fall into the next bracket of 35%. The standard deduction for a married couple with two children filing jointly is set at $32,000.
– If you are head of household (single or unmarried) with dependents, your first $24,000 in earned income would be taxed at 12%; every dollar over that amount until it reaches $90,000 would be taxed at 25%. The remainder — anything $90,000 –would fall into the next bracket of 35%. The standard deduction for the head of household is set at $18,000.
– If you have a child with someone who doesn’t live with you and is not your dependent. Up to $1,050 in earned income would be taxed at 12%; every dollar over that amount until it reaches $45,000, would be taxed at 25%. The remainder — anything above $45,000 –would fall into the next bracket of 35%.
A middle-income American with two kids and a home mortgage might save about $850 a year under this plan.
How much you’ll save depends on a lot of factors: Your marital status. Also, how many children do you have, how many deductions from previous years are still in effect. How many hours you work a week, and so forth.
Rather than giving Americans all different exemptions and deductions based on their personal situations. The TCJA would standardize these benefits across the board for everyone who isn’t itemizing.
For example, instead of providing a $6,000 exemption (effectively eliminating income tax liability). For every dependent named by an individual taxpayer. Including children and other relatives — H.R. 1 offers a $12,000 “Family Flexibility Credit,” which could also be claimed by taxpayers or split between two married individuals filing separate returns to reduce their taxable income. As per William D King, this credit can also be claimed for elderly parents and other dependents.
Taxpayers without dependents will get the full $12,000 credit.
Taxpayers with kids and other dependents will get a $500 credit for their first child and an additional $500 for each of those children until the maximum is reached. But only half that much if they’re married and filing separately.
The plan would eliminate personal exemptions. Which currently provides $4,050 in tax relief for every member of your household (including yourself). Why? Personal exemptions can also be claimed by any taxpayer. Whether or not he itemizes, while deductions only reduce taxable income from individuals who choose to itemize.
This bill addresses tax reform in a fair and equitable way. Providing Americans of all socioeconomic classes an opportunity to keep more of their hard-earned money.
– Many working-class families would likely see an increase in income taxes. Because the standard deduction has been eliminated and there aren’t enough deductions left for individuals who don’t itemize.
– The Tax Policy Center estimates that 1/2 of Americans will end up paying more under the new plan (the other half pay less or about the same).
– The bill eliminates many credits and deductions, including Expenses related to caregiving Birth control for Students pursuing higher education. Also, teacher expense Student loan interest Moving expenses unreimbursed employee expenses IRA contributions for public employees Dependent care benefits.