Tax Reform Bill Heads to President’s Desk
The Senate and House of Representatives today passed a tax reform package that is expected to be signed by the president. Below is a quick takeaway, but we will provide a more comprehensive look at the bill in the coming days—including a podcast episode dedicated to tax reform.
What Does the Tax Reform Bill Mean for Low-Income Earners?
Aside from lowering the statutory corporate tax rate from 35% to 21%—perhaps the most well-known facet of the tax plan—this bill lowers several individual rates and makes key changes to the tax code that affect low-income earners.
The tax reform bill does not reduce the number of individual brackets, but it does lower the rates for five of the seven:
Old Tax Brackets
| Single Filers | Tax | Filing Jointly | Tax | |||
| Over | But not over | % | Over | But not over | % | |
| $0 | $9,325 | 10% | $0 | $18,650 | 10% | |
| $9,325 | $37,950 | 15% | $18,650 | $75,900 | 15% | |
| $37,950 | $91,900 | 25% | $75,900 | $153,100 | 25% | |
| $91,900 | $191,650 | 28% | $153,100 | $233,350 | 28% | |
| $191,650 | $416,700 | 33% | $233,350 | $416,700 | 33% | |
| $416,700 | $418,400 | 35% | $416,700 | $470,700 | 35% | |
| $418,400 | - | 39.6% | $470,700 | - | 39.6% | |
New Tax Brackets
| Single Filers | Tax | Filing Jointly | Tax | |||
| Over | But not over | % | Over | But not over | % | |
| $0 | $9,525 | 10% | $0 | $19,050 | 10% | |
| $9,525 | $38,700 | 12% | $19,050 | $77,400 | 12% | |
| $38,700 | $82,500 | 22% | $77,400 | $165,000 | 22% | |
| $82,500 | $157,500 | 24% | $165,000 | $315,000 | 24% | |
| $157,500 | $200,000 | 32% | $315,000 | $400,000 | 32% | |
| $200,000 | $500,000 | 35% | $400,000 | $600,000 | 35% | |
| $500,000 | - | 37% | $600,000 | - | 37% | |
Other Important Tax Changes
While personal exemptions are eliminated, the standard deduction is increased from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married filing joint filers. Another change that’s likely to impact low-income taxpayers is the adjustment to family tax credits.
The Child Tax Credit (CTC) is being doubled from $1,000 to $2,000, and the refundable portion will be increased from $1,100 to $1,400, which will likely result in lower-income families seeing CTC-related refund dollars.
Remember to check Taxing Subjects for more updates on tax reform and other tax-industry related news.
