The GOP has rearranged the tax brackets from seven into four. This is good for some, and not for others. Simple is better in some cases, especially with tax. Here is the scoop on how the new tax codes will affect you.
Winners and Losers
Losers: Low income filers with children and households that are inadvertently bumped into a higher bracket.
Winners: Low-to-middle income households and the 5.2 million middle-to-high income taxpayers who are subject to this levy.
According to the new plan, the standard deduction will change from $24,400 for married couples who file jointly and $12,200 for single filers, which is nearly double up from the current rate.
Current and New Tax Brackets
There are currently seven tax brackets which break into the following categories:
10%, 15%, 25%, 28%, 33%, 35% and 39.6%.
The four new and simplified tax brackets are as follows:
12%, 25%, 35%, and 39.6%.
The new tax plan could hurt singles with children. According to Slate, the new tax plan would do away with personal exemptions, which currently allow parents to deduct $4,050 from their taxes for themselves and each of their dependents. This would lead to parents owing more taxes on their earnings. The new tax plan would also increase the lowest tax rate from 10 percent to 12 percent.
Slate simplifies this here:
“Consider a married couple with two children earning $50,000. Today, they’d be allowed to take the standard deduction, worth $12,700, plus four personal exemptions, worth $16,200—bringing their tax-exempt income all the way up to $28,900. Under the Trump plan, they’d only have a single $24,000 deduction. As a result, they’d end up paying $888 more in taxes.
All working-class couples with children whose adjusted gross incomes fall between $24,000 and $60,000 will pay more in taxes under the Trump plan than under the current tax system, according to Daniel Hemel and Kyle Rozema from Slate.
Additional Money for Singles Standard Deductions
Under the current system, a single filer can take a standard deduction of $6,350 and a personal exemption of $4,050. That equates to $10,400 in tax savings compared with the proposed $12,000 standard deduction for singles.
GOP Tax Plan Pros and Cons
Depending on where you fall in the income earning bracket, you will either win or lose. If you find yourself at the top of a tax bracket cutoff, find a new way to make more money and bump up into the next category where you can have a better break. There are only four, so make sure you know where you stand. Also, converse with a licensed CPA before making any decisions on your money. Knowledge is power.