10 Ways the New Tax Law May Affect You

Just a few days ago, President Trump and his supporters in Congress succeeded in passing their comprehensive legislative tax reform. With only a 33% approval rating, the new system is one of the most unpopular bills passed in recent years. In fact, more than half of Americans actually oppose the bill – marking the incumbent party’s lack of attention to public opinion.

The bill is stacked with corporate tax breaks, repeal of the individual mandate, and some other regulations that favor increasing the profits of large corporations. The idea is an old one – trickle-down economics has been promoted since the days of Herbert Hoover – but what does it mean for the individual taxpayer? In this article, we will go over ten ways that the newly passed Tax Cuts and Jobs Act will affect you beginning in 2019.

Lower Tax Rates

No matter who you are, the new bill will lower your tax rates. It retains the current seven income bracket system, but decreases the current percentages for every taxpayer in America. This means that what you pay up front for taxes will be lower, leaving you with more money in your pocket every time you get paid.

The percentages for the seven brackets today: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%

Percentages after the new tax plan goes into effect: 10%, 12%, 22%, 24%, 32%, 35% and 37%

As you can see, unless you are in the very lowest tax bracket, your short-term income will benefit from the new tax plan.

No Individual Mandate

The Tax Cuts and Jobs Act also scraps the individual mandate portion of the Affordable Care Act that was passed under the Obama administration. While you will no longer be required to purchase health insurance to avoid a tax penalty, it is worthwhile to note that profit loss from the current companies will lead them to raise their prices. From an individual’s point of view, health insurance prices will increase. This will happen just to maintain homeostasis in the industry, after the companies lose customers due to the repeal of the individual mandate. You can definitely expect higher healthcare costs in 2019.

No Estate Tax

If you own an estate that is worth more $5.49 million as an individual, you are currently subject to the estate tax. Under the GOP’s tax bill, the limits on who must pay the estate tax are doubled. This means that only the wealthiest of Americans will be subject to the tax. You will need to be worth $10.98 million for the estate tax to affect you in 2019, or nearly $22 million if you are filing taxes as a married couple. This tax break may only affect the wealthiest Americans, but it represents millions of dollars being left to the people rather than put into the government.

Doubles Standard Deduction

If you are like most Americans, you probably take the standard deduction when you are filing your taxes. The good news is that under the GOP’s new tax plan, these numbers are doubled. This will lead to more Americans taking this deduction in lieu of itemizing their taxes. The rates have been increased to $12,000 and $24,000 for single and married filers respectively. This could be good for low-income Americans in certain circumstances.

Expands Tax Credits for Dependents

Whether you have a child or a non-child adult dependent, you will be able to take an increased tax credit for them starting in 2019. The tax credit for having a child has simply been increased to $2,000 — $400 of which will be refundable if the family’s tax liability comes to zero at tax time. The bill also adds a new tax credit for a non-child dependent (such as a child over 17, or an elderly or ailing parent/other family member). This allows a $500 credit for each non-child dependent claimed.

No More Personal Exemptions

Currently, you may claim a $4,050 exemption for each of your dependents, your spouse, and yourself. The GOP’s tax plan gets rid of these exemptions, favoring tax credits instead. This means that you will not be able to claim as much non-taxable income for your taxes in 2019. You will get taxed at a higher rate – the GOP bill aims to reduce the impact of this higher taxation with higher deductions and more tax credits.

You Can’t Deduct as Much of Your Mortgage

The Tax Cuts and Jobs act includes a provision lowering the cap on the amount of mortgage interest you can deduct from your taxable income. Currently, you may deduct up to $1 million of debt from your taxes. Under the GOP’s new plan, this is lowered to $750,000. This may only affect wealthier Americans with more expensive homes, but it could still be significant for a large portion of taxpayers. This section of the new law will also completely eliminate the currently-allowed deduction for home equity loan interest.

New Cap on State and Local Deductions

Currently, you may deduct an unlimited amount of property taxes, income tax, and sales tax from a state or local tax level. However, the new plan will cap the deduction at $10,000. This is meant to reduce the budget burden that federal tax cuts will cause for the government. Though the bill caps possible deductions from the state and local tax levels, it also increases the standard deduction. This means less of a tax burden for low and middle-income families, who generally claim less than $10,000 for their state and local tax deductions. Under the new bill, you will be able to take a higher standard deduction. This also provides better tax breaks for high-income households with high state and local taxes.

Less Chance of Being Subject to the AMT

The Alternative Minimum Tax, or AMT, is a tax that is imposed on higher-income families. It is designed to make wealthy people who can claim many exemptions pay their fair share in taxes. Although the AMT is preserved in the GOP’s new tax bill, the lower limit for being subject to the tax is raised significantly. Originally, singles were subject to the tax if they made more than $54,300, and married couples if they made more than $84,500. Under the new tax plan, these are raised to $70,300 and $109,400 respectively.

Popular Tax Breaks Were Preserved

One of the biggest concerns faced with the original bill was the elimination of deductions for medical expenses and education-related expenses (including student loan interest and classroom supplies). However, in light of this incredibly unpopular provision, the bill that passed was revised to retain the tax breaks as they currently are. In fact, you will be able to deduct more medical expenses – which will be very necessary due to the increased health insurance premiums.

The GOP’s new plan is catered mostly to high-income Americans and large corporations. It is designed to take some of the tax burden off of every American. However, it does so at the cost of healthcare and many exemptions that we currently enjoy during tax season.

What do you think of the plan? It is very unpopular in America today. We encourage those who support or oppose the bill to comment below.

Add Comment

10 Things You Didn’t Know about REDX CEO Mark Leck
10 Things You Didn’t Know about Christine Crane
O.H.I.O. Your Email To Shrink Your Inbox
The Top 5 Tax-Saving Tips For Small Business Owners
10 Things Every Single Person Needs to do With Their Money
10 Things You Need to Know about Divorce and Credit
Pros and Cons of Paying Off Your Credit Card with a Personal Loan
How to Gain Extra Rewards Points by Buying Gift Cards
Australia on the Brink of Eliminating Cervical Cancer
New Hope in the Fight against Debilitating Irritable Bowel Syndrome (IBS)
Gene Editing Might Change Those Susceptible to Heart Disease
Google is Cool But Do you Know what Baidu’s Doing?
The Top Five Luxury Ski Resorts in South America
Exploring Nevada’s Heavenly Mountain Resort & Carson Valley
Blaze Your own Oregon Trail
Spending Three Perfect Days in Colombo
A Closer Look at the Rimac C Two Electric Supercar
What We Know about The Pininfarina H2 Speed Supercar
A Closer Look at the 2019 Jaguar I-Pace
20 Things You Didn’t Know About Bugatti
A Closer Look at The Jaquet Droz Grande Seconde Moon Onyx
A Closer Look At The Audemars Piguet Royal Oak Offshore Tourbillon Chronograph 25th Anniversary
A Closer Look at The Breitling Navitimer 8 B01
A Closer Look at The Hamilton Khaki Pilot Auto Day Date