On the surface, at 20% it appears to be a win for me, but I won’t know until I find out what deductions are going away. As always, the devil is in the details.
I appreciate the initiative of at least getting something out there... just need to see more details, so I’ll reserve judgment.
I too would fall into the 20% tax bracket as a single filer with no dependents.
Looking at my 2014 federal return, my marginal tax rate was 25% but the effective tax rate, the rate at which I actually paid was 14% (actually 14.3411%).
With this huge reduction in rates, many of the current exemptions and deductions will become unnecessary or redundant.. Those within the 10% bracket will keep all or most of their current deductions. Those within the 20% bracket will keep more than half of their current deductions. Those within the 25% bracket will keep fewer deductions. Charitable giving and mortgage interest deductions will remain unchanged for all taxpayers.
I am not sure what the above statement taken directly from Trump’s plan means to me. I only had wage income, did not itemize and took only the standard deduction and exemptions, I don’t have a mortgage nor do I make enough charitable giving to bother deducting for it, ending up last year with a refund of $10.00. : ),
If I look at it one way; it would be a reduction for me of 5% on the marginal rate of 25% to a marginal rate of 20%. If that rate is then actually calculated on AGI exactly as it was calculated last year – using the same standard deductions and exemptions as last year, I would see a reduction in taxes of $781.15 or an overall 9% reduction in the effective tax rate – and that is the rate that really matters. However, “IF” I were to lose some or all of my deductions, taken as pre-tax payroll deductions for contributions to my 401k and to my HSA, on my pre-tax employer Section 125 health benefits, and or “IF” the standard deduction and exemptions were totally eliminated for me, I “could” actually end up paying more to the tune of $1,248.85 – a 14% increase. While the marginal tax rate would be lower, “IF” – and in the very worst possible case scenario, 100% of my gross income is now taxed under Trump’s plan, even at the lower rate of 20%, I end up paying substantially more because more of my income would now be taxable.
Before I jump on the bandwagon of how great this tax plan is, I’d really like to see some specifics as to what deductions will be eliminated or reduced for those in the 20% and 25% brackets. I seriously doubt his plan will totally eliminate or greatly reduce the standard deductions or exemptions or on pre-taxed employer benefits, but as ScottinVA said, “As always, the devil is in the details.”