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.


Source Drake Taxing Subjects

TAX CUTS AND JOBS ACT – A LOOK AT SOME PROVISIONS:

Following are some of the provisions of the Tax Cuts and Jobs Act. For a complete report of the Conference Committee final tax provisions click here.

• Corporate Tax Rate:  the Conference Committee settled on a corporate tax rate of 21%, considerably lower than the current maximum rate of 35%. The rate would take effect in 2018.
• Individual Tax Rates:  the highest rate would drop from the current 39.6% to 37%, however, they retained the seven tax brackets.
• Higher standard deduction but personal exemption eliminated: the bill would double the standard deduction from $6,350 (single) and $12,799 (joint) to $12,000 and $24,000 which is expected to lower the number of taxpayers who itemize. At the same time, the bill would eliminate the personal exemption, but some credits were also increased.
• State and local taxes: taxpayers would be able to deduct up to $10,000 of all taxes combined for state and local taxes, real estate taxes, and income and sales taxes.
• Mortgages indebtedness: interest can be deducted on loans up to $750,000.
• Resolution on pass-through entities: owners of pass-through entities such as S corporations and partnerships would be able to apply a 20% deduction to their business income, with limits starting at around $157,000 for single taxpayers and $315.000 for joint returns.
• Alternative minimum tax: the AMT was rescinded for businesses but remains for individuals. However, it would apply affect fewer taxpayers.
• Estate tax: the exclusion amount has been doubled to approximately $11 million but is scheduled to sunset in 2026.
• Child tax credit: the legislation increases the child tax credit to $2,000 per child (up from $1,000) and raised the phase out amounts. The refundable portion of the credit was raised from $1,100 to $1,400.
• Medical expense deduction: for 2017 and 2018 the threshold would drop back to 7.5% of AGI, increasing back to 10% in 2019 (yes, this provision is retroactive to 1/1/2017).
• Affordable Care Act: the bill rescinds the individual mandate for insurance
• Credits preserved include: Child and Dependent Care Credit and the Adoption Credit.
• Student Loan Interest: has been retained which had been eliminated under prior proposals.