Last week, the Senate passed the Republican tax bill and it was sent to the House for a vote and is expected to be passed and sent to President Trump’s desk. With much discussion about whether the bill will help or hurt Americans, here is an outline of what changes will be made to the American tax code.
The current tax code has seven income tax brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The Senate tax bill has seven brackets, but changes the percentages on taxable income. Here are the new brackets:
- 10% (income up to $9,525 for individuals and up to $19,050 for married couples)
- 12% (over $9,525 to $38,700 for individuals and over $19,050 to $77,400 for couples)
- 22% (over $38,700 to $70,000 for individuals and over over $77,400 to $140,000 for couples)
- 24% (over $70,000 to 160,000 for individuals and over $140,000 to 320,000 for couples)
- 32% (over $160,000 to $200,000 for individuals and over $320,000 to $400,000 for couples)
- 35% (over $200,000 to $500,000 for individuals and $400,000 to $1 million for couples)
- 38.5% (over $500,000 for individuals and over $1 million for couples)
The new law eliminates personal exemptions, meaning you can no longer claim a tax deduction against personal income. It also expands the child tax credit from $1,000 to $2,000. According to the law, taxes for everyone will be lower, regardless of income bracket, however, wealthy people will have the greatest tax break as they have more money to save from the current tax plan. The corporate tax rate will drop from 35% to 20% to encourage companies to build their companies here and use American manufacturing. However, the biggest change comes in the filing process. Taxes will be filed using a simple “postcard”, meaning no more loopholes or complicated paperwork to fill out. Taxes will be completed quickly and efficiently, using one piece of paper.
The final bill will be available after it passes in both the House and Senate after changes are made by leaders of Congress to insure a majority vote in both chambers.
Cover Photo Courtesy of Evan Vucci/Associated Press Images