President Trump has just announced the outline for his tax reform and as a tax pro i just wanted to break it down as simple as i could so most people would understand what he is talking about. There is no opinion in this breakdown just a simple reiteration of the key factors that will affect 90% of people. I will not address anything to do with the corporate tax side. First lets talk about the tax rate.
Under the current plan there are 7 tax brackets ranging form 10%-39.5%. Simply put that is what you pay the fed depending on how much you made. In the plan The President has presented there will only be 3 tax brackets 12%, 25%, and 35%. Some will say well he is lowering the taxes on the rich and raising them 2% on the poor. That is not entirely true based on the doubling of the standard deduction.
What is a standard deduction? Well lets say you are married and you household makes $40,000 per year. Under the current plan you will take the current standard deduction ($12,600) from what you made ($12,600-$40,000) and pay on the difference ($27,400). Under the announced framework it would look more like this $24,000-$40,000= $16,000. So although your tax bracket went up 2% you are being taxed on 28% less income. President Trump also proposed an increase to particular credits and a creation of a new one.
he specified that he would like to rise the child tax credit (currently $1,000 per child under 17) to an unspecified amount and create a $500 credit for certain dependents such as the elderly.
Those are the key points as i see them in this outline that was presented. I would be more then happy to discuss these proposed tax cuts and how they apply to you just give us call, drop us a comment below or email us. Hope this helped!