Part 1: Individual Taxes
There are a huge variety of factors to weigh in trying to figure out whether individuals/households would see an increase or decrease in their tax rate. According to the bill’s supporters, most Americans are likely to see a small reduction of taxes under the plan; however, many Americans will see an increase, such as those living in high-tax states & who currently itemize their tax returns. Most of the dollar for dollar benefits would be seen by the highest earners. Here’s a breakdown:
- Reduces number of tax brackets from the current seven to four:
| Income TaxRate | Income Levels for Those Filing As: |
| Current | Tax Act | Single | Married-Joint |
| 10 - 15% | 12% | $0-$44,999 | $0- $89,999 |
| 25 - 28% | 25% | $45,000- $199,999 | $90,000- $259,999 |
| 28 - 39.6% | 35% | $200,000 - $499,999 | $260,000 - $999,999 |
| 39.6% | 39.6% | $500,000+ | $1M+ |
- Increases standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
- Eliminates itemized deductions (except for those on charitable contributions, retirement contributions, mortgage interest*, & property taxes**).
- *Mortgage interest deduction would only be allowed for new mortgages of $500,000 or less
- **Property Tax deductions capped at $10,000
- The elimination of itemized deductions would result in the loss of deductions for:
- Medical Expenses: Currently, medical expenses that are more than 10% of your income can be deducted.
- State & Local Taxes: This is estimated to harm over 40 million filers, primary those in high-tax states like California, New York, Hawaii & DC.
- Also eliminates:
- Student Loan Interest deduction;
- Moving deduction;
- Eliminates the Adoption Tax Credit
- Educator expense deduction; and
- Exclusions for employer-dependent care programs, among others.
- Expands the Child Tax Credit from $1,000 to $1,600 and provides a credit of $300 for each parent and non-child dependent.
- Eliminates personal exemptions. The exemption currently allows taxpayers to subtract $4,050 from income for each person claimed on the tax return. Families with many children would pay higher taxes under the Tax Act despite the increased standard deductions. For most families with more than one child, the increased deduction wouldn’t outweigh their loss of the exemption.
- Repeals the Alternative Minimum Tax.
Check back for the second part of this series, where we’ll cover the bill as it relates to corporations, the estate tax, & other miscellaneous provisions.
-by Laura Bown (Law Clerk/JD Candidate, 2018, Boyd School of Law, UNLV) with Tiffany Ballenger Floyd, Esq. (Nevada & California Estate Planning Attorney), Phillips Ballenger, PLLC