President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law in December 2017, enacting the most sweeping overhaul of the tax code in decades. While marketed as tax relief for the middle class, the complex mix of provisions produces variable impacts depending on your income, family status, deductions, and more. In this post, we’ll explore how major changes under Trump’s tax plan specifically affect individual taxpayers based on their personal situation.
Tax Bracket and Rate Changes
The TCJA alters the tax brackets and rates that determine baseline income tax liability [1]:
- The law retains the existing seven tax brackets but adjusts the income ranges each applies to, generally resulting in lower rates across brackets.
- For example, the previous 25% bracket for incomes $75,000-$100,000 falls to 22% now.
- However, the individual bracket changes will expire in 2025, returning to 2017 levels unless Congress extends them.
For most earners, lower marginal rates result in some amount of tax reduction until the temporary cuts expire.
Near Doubling of the Standard Deduction
Standard deduction amounts were drastically increased under the TCJA [2]:
- For single filers, the standard deduction rose from $6,350 to $12,000.
- For married couples, it increased from $12,700 to $24,000.
- This simplifies filing and provides tax reductions for non-itemizers.
The bigger standard deduction offers an easy tax cut for middle income earners taking it instead of itemizing.
Elimination of Personal Exemptions
While increasing the standard deduction, personal exemptions were eliminated [3]:
- Previous tax filers could claim a $4,050 exemption for each dependent.
- Dependent exemptions allowed tax reductions tied to supporting children and elderly parents.
- For larger families with multiple dependents, the lost exemptions can offset higher standard deduction benefits.
Losing personal exemptions increases taxes for some larger households.
Changes to Some Itemized Deductions
Several itemized deductions individuals relied on were modified under the TCJA [4]:
- The cap on state and local tax (SALT) deductions increased from $10,000 to $15,000. This still harms residents of high-tax states.
- The mortgage interest deduction was lowered from loans up to $1 million to $750,000. This impacts homeowners with larger loans.
- Charitable contribution deductions were expanded by raising the limit percentage of income.
The combined impact on itemized deductions produces mixed results for different households’ tax bills.
Expansion of Child Tax Credit
One widely beneficial change was expanding the child tax credit (CTC) [5]:
- The maximum CTC increased from $1,000 to $2,000 per qualifying child.
- The income level where the CTC phases out was significantly raised.
- The refundable portion available to lower-income filers increased from $1,100 to $1,400.
Raising the CTC offers substantial savings for families with multiple dependents.
Lower Estate Tax Exemption
Wealthy individuals gained from the doubling of estate tax exemptions [6]:
- The estate tax exemption doubled from $5.5 million to $11 million for individuals.
- As a result, far fewer estates will owe any estate tax following a death.
- However, this provision expires in 2025 like the individual tax changes.
While irrelevant for most, the higher estate tax exemption benefits very affluent inheritors.
Bottom Line Impact
The TCJA’s overall impact on your taxes will depend on individual circumstances [7]:
- Income level – Bracket changes help middle earners most. Higher incomes see smaller benefits or none at all.
- Homeownership – Loss of exemptions and SALT cap hurts homeowners in high-tax areas.
- Family size – Larger families lose from dependency exemptions being eliminated.
- State residence – Unlimited SALT deductions helped higher-tax states before.
Absent extending them, many individual tax benefits under the TCJA prove temporary.
Conclusion
Donald Trump’s tax overhaul contains a complex mix of interrelating provisions that make judging one’s individual outcome difficult. For some groups like businesses, heirs, and high-earners, benefits clearly outweigh costs. But for many middle income earners, impact depends on specific deductions relied upon. With many individual tax changes slated to expire under the legislation, Trump’s tax plan works best for Americans focused on their tax situation in the law’s early years rather than the long term.
References
[1] https://taxfoundation.org/2017-tax-brackets/
[3] https://www.hrblock.com/tax-center/irs/tax-reform/new-standard-deduction-eliminated-exemptions/
[5] https://www.irs.gov/newsroom/ten-facts-about-the-child-tax-credit
[6] https://www.jdsupra.com/legalnews/estate-tax-101-what-the-new-doubling-of-74185/
Hi y’all, I’m Caroline Webster, your proud Texan source for everything related to our 45th president, Donald Trump, and the GOP.
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