What Could a Tax Overhaul Mean for You?

On September 27, 2017, the Republican Party uncovered its large-scale plan for taxes. Whether the 9-page outline, or what people are referring to as a framework, really becomes the tax plan will depend on numerous factors, which include the calendar (Congress has hopes to pass it prior to the end of 2017) and naturally, politics. Plus, even if Congress passes its plan, and Trump signs it into law, its details drastically could change from what they presently are. Still, the tax plan has been placed forth for our country to assess, and naturally, you might be wondering – what is in those 9 pages, and how may it affect me?

The key word within that last sentence is may. Nothing’s certain, particularly within this political climate. Still, a little of what may come to fruition involves these:

Tax cuts

Currently, there are 7 individual income tax brackets. This new plan could have 3 – 12%, 25% and 35%. At present, precisely where your yearly salary falls within those brackets is not known. However – just as it now is – those earning the least money might be inside the 12% bracket (presently it is 10%). The middle class could be within the 25% income tax bracket. And top earners could get 35% rather than the present 39.6% that they are paying. According to the plan, there might wind up being a 4th bracket that is added for those highest-income earners.

It looks as if the richest are going to save the most of their taxes. At the minimum, judging from what a few institutions have concluded. The Urban-Brookings Tax Policy Center researched the proposal and decided that, the way it appears currently, almost 3/4 of the savings from this tax reform could be diverted to the leading 20% of earners, which could be anybody who makes $149,000 and up. Over 50% of the savings are predicted to go to the leading 1% (the ones who bring in over $732,800).

In the meantime, the Tax Policy Center discovered that over 30% of households that have income from $150,000 to $300,000 would see taxes rise.

Believe that side-gig income is free of taxes, or that an extension will always makes sense financially? Think again.

Plus, while the tax plan looks to promise tax cuts for all people, experts believe that there might be some households in the middle class which witness a marginal increase in tax rates.

A Stetson University within Celebration, Florida professor of accounting, Valrie Chambers, is not certain what will occur with the middle class.

She adds that it is difficult to say what could happen with Middle America. Their individual taxes are going to vary. But, what we know is that their proposed framework is expensive and could cause the deficit to explode. Ordinary Americans eventually will need to pay for that.

Less deductions

Republicans are recommending almost doubling regular deductions of $6,350 to $12,000 for a single filer and of $12,700 to $24,000 for couples who are married. This sounds promising for all taxpayers, and it might be – yet while it’ll make the standard deduction substantially greater, the plan also would erase nearly every additional personal deduction, except charitable deductions and the mortgage interest rate. Therefore, health care deductions, for example that resulted in $10 billion within savings for taxpayers in 2016 would be gone. Local and state and tax deductions, long a method for households to decrease taxes, also would disappear. Click here on more information on how Scott Partners Accounting Firm could help you with your tax deductions.

Credits and exemptions

The personal exemption that keeps $4,050 of income from becoming taxed and is offered to each family member, would vanish. Therefore, if you have a bigger family, you might have more of your income taxed. Presently, if you have, let’s say, 3 children and 2 adults in your family, you might lower your taxable income by around $20,250.

You will not have the ability to do this anymore. On the flip side, the math might work out for families. The present tax blueprint states the framework will “substantially increase” the child tax credit that now is $1,000 per each child below 17. However, no one yet knows how much more it is going to be.

Therefore, as you probably can see, there is a ton of uncertainty surrounding the tax plan, and it still is too early to know who might be the losers and winners with this framework, even though it seems clear that people with wealthy parents are going to do well with the plan. Because …

Bye bye, estate tax

If you earn over $5.49 million, you will be relieved and happy to understand that your heirs will not need to pay the estate tax, a tax upon the transfer of an estate of a deceased individual.