The New Republican Tax

How can the new tax overhaul affect you? Last Wednesday, both the House and Senate passed the proposed Republican tax overhaul in divided (224-201 and 51-48) votes split primarily along party lines. On Friday, President Donald Trump signed the bill into law, scoring the Republicans their first major legislative victory of 2017.   

Here is a comprehensive guide to some of the major changes and why they matter.

FOR INDIVIDUAL FILERS (all changes expire after 2025):

  1. New income tax brackets

Winners: the vast majority

Losers: people inadvertently bumped to a higher tax bracket

The former tax plan had 7 brackets: 10, 15, 25, 28, 33, 35, and 39.6%

Tax Rate Single Married (jointly) Head of Household Married Filing Separately
10 $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525
15 $9,525-$38,700 $19,050-$77,400 $13,600-$51,850 $9,525-$38,700
25 $38,700-$93,700 $77,400-$156,150 $51,850-$133,850 $38,700-$78,075
28 $93,700-$195,450 $156,150-$237,950 $133,850-$216,700 $78,075-$118,975
33 $195,450-$424,950 $237,950-$424,950 $216,700-$424,950 $118,975-$212,475
35 $424,950-$426,700 $424,950-$480,050 $424,950-$453,350 $212,475-$240,025
39.6 Over $426,700 Over $480,050 Over $453,350 Over $240,025


Fig. 1: Tax Brackets Chart

The Republican plan keeps the 7 brackets, but changes the rates to: 10, 12 22, 24, 32, 35, and 37%

Tax Rate Single Married (jointly) Head of Household Married Filing Seperately
10 $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525
12 $9,525-$38,700 $19,050-$77,400 $13,600-$51,800 $9,525-$38,700
22 $38,700-$82,500 $77,400-$165,000 $51,800-$82,500 $38,700-$82,500
24 $82,500-$157,500 $165,000-$315,000 $82,500-$157,500 $82,500-$157,500
32 $157,500-$200,000 $315,000-$400,000 $157,500-$200,000 $157,500-$200,000
35 $200,000-$500,000 $400,000-$600,000 $200,000-$500,000 $200,000-$300,000
37 Over $500,000 Over $600,000 Over $500,000 Over $600,000


Why it matters:

The new bill lowers rates for almost every tax bracket, and has generally higher income thresholds. Currently, the median American household falls in the 15% tax bracket,and the vast majority of Americans would see a lower tax rate under the proposed bill. However, in order to comply with Senate budget rules, all individual tax changes would expire after 2025. A little-discussed provision in the Senate tax bill could lead to a higher tax bill for millions of small investors and cause many to unload stocks before year-end to avoid those costs.

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  1. Larger standard deductions

Winners: Low/middle income households

The tax bill raises the standard deduction for married couples to $24,000 (up from $12,700) and to $12,000 for single-filers (up from $6,350).

Why it matters: The income tax brackets are only applied to the taxpayer’s adjusted gross income (AGI), an individual’s total gross income minus specific deductions. Taxpayers can choose one of two deductible options when reducing their taxable income, the standard deduction (a dollar amount that reduces the amount of income on which one is taxed, varying according to filing status) or an itemized deduction (a sum of deductions for expenses that individuals can claim on things like home mortgage,medical payments, charitable contributions, etc.) The Republican plan nearly doubles the standard deduction to try and consolidate all the itemized expense exemptions into one easy, standard package. According to the Heritage Foundation, approximately 9 out of 10 taxpayers will simply claim the new standard deduction.

 The new tax bill goes into effect on January 1, 2018, but will only impact filings in 2019 for the 2018 year.

Here are some other visual diagrams that calculate your odds of a tax hike by state:

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