And the timing is interesting, since the new inflation-adjusted tax brackets for 2018 came out in the last couple of weeks. Kelly Phillips at Forbes has a good rundown of the changes, and the article also includes easy-to-understand charts like this.
Those are good charts to keep in mind, as we still don't know where the Trump/Ryan plans would have their tax brackets cut off, nor do we know how many of the 7 brackets would remain. The original Trump/Ryan framework that came out in late September said there would be only 3 brackets, at 12%, 25% and 35%, but the man with Wisconsin's most punchable face said a couple of weeks ago that there should be a 4th, higher rate for the richest people.
Another part of the "Tax reform" framework involved increasing the standard deduction, which theoretically could make up for the end of some individual deductions. Interestingly, Phillips notes that even if nothing gets passed, the standard deduction is going up in 2018.
The standard deduction for single taxpayers and married couples filing separately is $6,500 in 2018, up from $6,350 in 2017; for married couples filing jointly, the standard deduction is $13,000, up from $12,700 in the prior year; and for heads of households, the standard deduction is $9,550 for 2018, up from $9,350.
Another question with the GOP tax package is whether the personal exemption will stay, or if it'll be removed to make up for the larger standard deduction. That's quite a big deal, since the personal exemption is also significant.
The personal exemption amount for 2018 is $4,150. However, the exemption is subject to a phase-out for married taxpayers with an adjusted gross income (AGI) beginning at $266,700 ($320,000 for married couples filing jointly) and phasing out completely at $389,200 ($442,500 for married couples filing jointly).Here's another different threshold for 2018, one which affects yours truly and a number of others who went back for more education and furthered our incomes.
Student Loan Interest Deduction. For 2018, the maximum amount that you can take as a deduction for interest paid on student loans remains at $2,500. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) in excess of $65,000 ($135,000 for joint returns) and is completely phased out for taxpayers with modified adjusted gross income (MAGI) of $80,000 or more ($165,000 or more for joint returns).Keep in mind that the student loan interest deduction is among those that may be taken away in the GOP's "tax reform", and you can see that it would only affect people in the upper middle-class or below. And it would be far from the only "reform" that would end up raising taxing on certain Americans. The largest of those potential raises comes from the proposed framework's plan to get rid of the State and Local Tax (SALT) deduction.
Apparently, getting rid of SALT hasn't gone over well, because over last weekend we found out that the GOP plan will have at least one major change from its original framework. House Ways and Means Committee Chair Kevin Brady said that the GOP now plans to allow property taxes to be written off under the updated tax plan.
Brady's concession on property taxes may help some of the moderate-income people who benefit from the deduction today.That standardized deduction would go to $24,000 for taxpayers filing jointly and $12,000 for single filers.
The majority of the SALT deductions claimed by those who make less than $50,000 come from property taxes, according to a report from the Government Finance Officers Association. By contrast more than 70% of the SALT deductions from those making more than $200,000 are due to income.
But it's not clear from Brady's statement if there would be any limits on who may take the property tax deduction. For instance, if it's available only to people who itemize, then chances are many wouldn't take it. That's because his bill would nearly double the standard deduction. And that would drastically reduce the number of itemizers, since you only itemize if your deductions combined exceed your standard deduction.
Which yet again means that we need to be able to see an actual bill before we can figure out where all of these parts fit together. Given how the Republicans continue to put back in the most popular deductions, it leads me to wonder where they’re going to find the money to keep the deficit from blowing sky-high with this
And if GOPs claim that "economic growth" coming from our already full-employment and aging country is the answer to fill in those revenue gaps? Republican Ben Stein would like to remind you that it isn't true.