The Biggest Tax Change of Your Life

The Biggest Tax Change of Your Life

Blog Post

By No Labels

The Biggest Tax Change of Your Life

For millions of American adults, the tax bill set to get a final vote in Congress next week will usher in the biggest tax changes of their lifetime.

The bill that emerged as a compromise between House and Senate legislation is widely seen as the most comprehensive overhaul to the tax code in 30 years. Millions of people and businesses will see a change in the rules that have governed taxation for decades, and many will see a corresponding change in how much they pay Uncle Sam. Whether that’s more or less depends on each person’s situation.

To become law, the bill must be reported out of the conference committee where it resides and then approved by both the House and the Senate. As Republicans continue their push — no Democrat has supported the effort — here’s what we know so far, according to reporting by Politico, The New York Times, and The Wall Street Journal.

There are major changes to the basics

The standard deduction that individuals can use to lower their taxable income will reportedly double. The $6,350 deduction for individuals would jump to $12,000. The $12,700 deduction for married couples filing jointly would move to $24,000. Tax brackets would also change, with the top bracket for individuals dropping from 39.6 percent to 37 percent.

Many popular deductions would remain, with some changes

The popular mortgage interest deduction would remain, but the cap would reportedly be lowered from $1 million to $750,000. The ability to deduct state and local property, income and sales tax from federal returns would be capped at a combined $10,000, a limitation that doesn’t currently exist. Deductions for student loan interest and medical expenses would remain, with some minimal changes.

Corporations will see huge changes

Corporations currently have three tax brackets, with the highest set at 35 percent. The bill would reportedly change the system to a single corporate tax rate of 21 percent, starting in 2018. No corporate Alternative Minimum Tax would apply.

Grad students can breathe easier

A provision to tax tuition waivers that many students receive for work as teaching and research assistants has reportedly been removed from the bill, after students nationwide launched protests and petitions to oppose it.

It Affects the Affordable Care Act

The bill would repeal the requirement in the Affordable Care Act that individuals purchase health insurance or pay a fine, fulfilling a major Republican campaign promise. The Congressional Budget Office estimates that the repeal would drive up the cost of premiums and cause millions to go without coverage in the next decade, according to Bloomberg.

There are Still Some Unknowns

The bill may change in coming days as Republican leaders work to ensure enough support for passage and struggle with its mounting costs. For example, they are already negotiating to secure the support of Senator Marco Rubio, a Florida Republican who wants changes to the child tax credit.

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