Here’s How the Trump Tax Plan Could Affect You
President Trump authorized a new tax obligation expense, the Tax obligation Cuts and also Jobs Act, into legislation in December 2017. This bill mostly really did not influence individual income tax obligations till the 2018 tax year, which you submitted in early 2019. How specifically the Trump tax obligation plan influences you depends upon your revenue, your current declaring status and also the deductions you take. Take a look at the complying with guide to assist you better comprehend the highlights of the new tax strategy.
A Brief History of the New Tax Plan
In 2017, Residence Republicans and also Head of state Trump functioned to present a tax expense that would simplify the tax obligation system. They revealed their long-awaited tax obligation costs, the Tax Cuts and also Jobs Act (TCJA), on Nov. 2, 2017. The costs required sweeping modifications to the current tax regulation.
Your home passed the final version of the expense on Dec. 20, 2017, with a last tally of 224-201. Twelve Home GOP participants and all Democrats opposed the legislation. Initially, your house passed the expense on Dec. 19, but a re-vote was needed because a number of provisions of the costs reportedly broke Senate regulations and also needed to be eliminated. The Us senate passed the fixed version of the expense in the morning hours of December 20, voting 51-48 along celebration lines. President Trump after that signed the bill into regulation on Dec. 22, 2017.
The majority of the tax modifications in the TCJA went into impact in January 2018, for the 2018 tax year. That means the modifications really did not impact many 2017 tax returns (you submitted 2017 tax obligations in very early 2018). Workers didn’t see changes in their income withholding until February 2018.
New Trump Tax Brackets – Still 7 Total
Trump’s tax obligation plan originally required reducing the variety of tax braces in the federal earnings tax system from 7 to four, yet the final version of the expense preserves the 7 braces. It does, however, alter their rates.
Formerly, the tax obligation brackets rose to a leading rate of 39.6%. The new tax obligation brackets, which applied since January 2018, have rates of 10%, 12%, 22%, 24%, 32%, 35% as well as 37%. These are the rates that determine your tax costs and still use in 2020.
The table listed below breaks down the brackets for single as well as joint filers. If you make use of have a different declaring condition, ensure to read our full malfunction of the existing tax braces.
Federal Income Tax Bracket for 2019 (filed in April 2020)
| Single | Married Filing Jointly | Married Filing Separately | Head of Household | |
| 10% | $0 – $9,700 | $0 – 19,400 | $0 – $9,700 | $0 – $13,850 |
| 12% | $9,701 – $39,475 | $19,400 – $78,950 | $9,701 – $39,475 | $13,851 – $52,850 |
| 22% | $39,476 – $84,200 | $78,951 – $168,400 | $39,476 – $84,200 | $52,851 – $84,200 |
| 24% | $84,201 – $160,725 | $168,401 – $321,450 | $84,201 – $160,725 | $84,201 – $160,700 |
| 32% | $160,726 – $204,100 | $321,451 – $408,200 | $160,726 – $204,100 | $160,701 – $204,100 |
| 35% | $204,101 – $510,300 | $408,201 – $612,350 | $204,101 – $510,300 | $204,101 – $510,300 |
| 37% | $510,301+ | $612,351+ | $510,301+ | $510,301+ |
Federal Income Tax Bracket for 2020 (filed in April 2021)
| Single | Married Filing Jointly | Married Filing Separately | Head of Household | |
| 10% | $0 – $9,875 | $0 – $19,750 | $0 – $9,875 | $0 – $14,100 |
| 12% | $9,876 – $40,125 | $19,751 – $80,250 | $9,876 – $40,125 | $14,101 – $53,700 |
| 22% | $40,126 – $85,525 | $80,251 – $171,050 | $40,126 – $85,525 | $53,701 – $85,500 |
| 24% | $85,526 – $163,300 | $171,051 – $326,600 | $85,526 – $163,300 | $85,501 – $163,300 |
| 32% | $163,301 – $207,350 | $326,601 – $414,700 | $163,301 – $207,350 | $163,301 – $207,350 |
| 35% | $207,351 – $518,400 | $414,701 – $622,050 | $207,351 – $518,400 | $207,351 – $518,400 |
| 37% | $518,401+ | $622,051+ | $518,401+ | $518,401+ |
The Trump Tax Plan Increased the Standard Deduction
There are deductions to consider as well. The new tax plan nearly doubled the standard deduction for all filers. If you’re a single filer or if you’re married filing separately, your standard deduction for 2019 is $12,400. Joint filers have a deduction of $24,800 and heads of household get $18,650.
| TAX YEAR 2018 (TRUMP PLAN) STANDARD DEDUCTIONS | |
| Single Filers | Married Filing Jointly |
| $12,000 | $24,000 |
| TAX YEAR 2019 STANDARD DEDUCTIONS | |
| Single Filers | Married Filing Jointly |
| $12,400 | $24,800 |
Big Changes to State and Local Tax Deductions (SALT)
During initial talks, Republicans called for eliminating almost all itemized deductions, including state and local tax (SALT) deductions, but keeping those for charitable deductionsand mortgage interest. Ultimately, the TCJA capped SALT deductions to $10,000.
Previously, taxpayers who itemized could deduct their state and local income, property and general sales tax payments on their federal tax returns. This was especially useful for residents of high-tax states like California and New Jersey. If you think this change could alter your taxes, make sure you read up on the new rules of SALT deductions.
Trump Tax Plan Changes to the Mortgage Interest Deduction
For tax year 2017, homeowners who itemized their deductions could deduct their mortgage interest payments on mortgages up to $1 million. For 2018 and beyond, the limit on this deduction is $750,000. If you’re married filing separately, your limit is $375,000 in mortgage interest.
