How will the Trump Tax Law Changes Impact You?
The Trump administration is working overtime for getting the tax law cleared, and it has exasperated the average tax payer as to what is happening, and how it is going to affect him or her. Whatever happens, an average taxpayer must know that the impact of any changes will not take place before the tax year 2018. Hence the 2017 taxes will need to be filed as usual.
How will the proposed tax law impact an average taxpayer like you and me? Here is a summary of what to expect from the proposed tax law, as compared to the current tax law for individuals (The table does not show Corporate and Business Tax changes):
Issue Current Proposed Notes
Tax rate slabs
Current: 7 (10%, 15%, 25%, 28%, 33%, 35%, 39.6%)
New: 3 (12%, 25%, 35%)
Simple, but note that the minimum tax rate is higher
Standard Deduction (Single)
Current: $6,350
New: $12,000
Balanced by removal of Personal exemption
Standard Deduction (MFJ)
Current: $12,700
New: $24,000
Personal Exemption
Current: $4,050
New: Eliminated
For MFJ, a return with standard deduction will pay taxes on $3,200 less than earlier (24,000-12,700-4,050-4,050)
Medical Expenses on Schedule A
Current: Deductible once they exceed 10% of AGI Deduction
New: Eliminated
Older people will not get advantage of high medical bills that took their itemized deductions higher
Mortgage Interest and donations
Current: Applies on Schedule A
New: Will continue
Process on how these will be put on the return is awaited
Health Insurance
Current: Credit Premium tax credit for people who purchased health insurance through the market
New: No provision People having coverage at low premium from the marketplace are uncertain about the insurance cover
Child tax credit
Current: $1000 per child
New: Child tax credit will increase.
Details awaited
AMT
Current: Applies
New: Repealed
Helps higher income bracket people
3.8% Net investment Income Tax
Current: Applies
New: No provision
Helps higher income bracket people
.9% Medicare for high earners
Current: Applies
New: No provision
Helps higher income bracket people
Education benefits AOTC, Lifetime Learning etc
No changes To encourage higher studies, this will remain
HSA
Current: $3,550 for single, and $6,750 for MFJ
New: No provision
This is going to hit common middle class
FSA
Current: $2,500
New: No provision
Another saving process taken away from middle class
Penalty for no health Insurance
Current: Applies
No provision
Will help people who do not want to insure
As mentioned these are all provisional, and they might change. Be your own judge as to how these will impact you. In a nutshell, it may not help the average tax payer much.
Feel free to contact if there are any questions.
Your tax de-mystifying partner
Tax Guru USA
Email: tax@taxguruusa.com