“On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act.”
Fact: Most Americans wonder how the current wave of tax reform will affect them. This article by Kimberly Amadeo summarizes how the Act changes the amount of income tax that both individuals and businesses pay.
Significant changes in the Act for individuals include
- Lower tax rates (highest rate in 2017 was 39.6 percent drops to 37 percent in 2018) could mean an increase in the amount individuals take home each payday.
- Personal exemptions ($4,150 in 2017) per person are eliminated.
- The standard deduction almost doubles for a single person ($6,350 in 2017) to $12,000. For married and joint filers the standard deduction ($12,700 in 2017) is now $24,000.
- More taxpayers will opt to take the standard deduction instead of itemizing deductions.
- For those taxpayers who choose to itemize, many itemized deductions that were previously allowed have been eliminated.
- Taxpayers who itemize can still deduct charitable contributions, most mortgage interest, retirement savings, and student loan interest.
- Taxpayers who itemize can still deduct up to $10,000 in state and local taxes.
For businesses, the largest and most signification change is lowering the maximum corporate tax rate from 35 percent to 21 percent beginning in 2018.
The article does provides more specific information about how the Tax Cuts and Jobs Act affects both individuals and businesses.
For more information, click here.
You may want to use the information in this blog post and the original article to
- Discuss how the Tax Cuts and Jobs Act will affect a single college student or a typical American family.
- Explore how lower corporate taxes could impact economic growth, worker salaries, unemployment rates, job creation, and other factors that impact both the nation and individuals.
- Given the information contained in this article and other reports, do you think the Tax Cuts and Jobs Act is good for you? Explain your answer.
- For an individual, what effect does lower taxes have on your spending, savings and investments, and retirement planning?