People in liberal, high tax states don’t do well in this bill, especially those owning expensive homes and making more than $300k. Frankly, it’s time to move to a no state income tax state like Nevada, Texas, or Florida for these folks.
However, I do not see how typical middle class people get hurt very badly.
The standard deduction goes up to $24k. That’s a lot of deductions for people to even hit to itemize.
Tax rate in NY is 6.65%, so if you are making $100K, that’s $6,665. If you own a $300,000 home, you pay $9K in property taxes so that’s about $15k in total deductions. The limit in the bill is $10k. This hypothetical family is only losing $5k in deductions worth just $1100 at the 22% tax rate.
Mortgage interest is unaffected up to $750k.
I can see those making $300K+ and owning expensive real estate hurting, but if they have large families, each kid is worth $2k in child tax credit they couldn’t qualify before. 4 kids can be worth $8k extra.
There’s lots of variables. Families with kids that make over $110K should do well even in NY and CA under this bill.
Those making over 300k with lots of State taxes are subject to alt min tax which is eliminated under new tax law for that income level. That change doesn’t show up on these simple calculations. I am in CT, a high tax state and most of my higher income clients did not get tax benefits from salt deductions.
Not interested.
The purpose of this was to reform our ghastly corporate tax rate which hurts our economy daily.
It has kept US corporate profits abroad and paying no taxes as they never were declared here. It hurts business compared to corporate tax rates in other countries.
To boom our economy and get employment back we needed that stupid rate cut.
The individual and joint rate was altered for political necessity as cutting rates for business alone would have freaked everyone.
And they reached that $24K level by combining the Personal Exemption with the Standard Deduction +/- depending on children. So a married couple with no kids had a $9,100 PE + $12,700 SD = 21,800 total. Great if you don't itemize as you will have $2,200 less taxable income. But for those that do itemize, they start with $9,100 more taxable income due to the loss of Personal Exemptions, then they get less deductions.
So, add $9,100 to your example, making the increase in taxable income $14,100, so at 22%, that's $3,100.
The Child Tax Credit is also reduced by the loss of Dependent Exemptions by $4,050 x Tax Rate per child. So at the 25% rate, your child tax credit is actually being reduced by $12.50.
Yep. But for a retired couple in several states, it's possible to have a higher reduction of taxable income under the current tax system, particularly for couples with moderate taxable income (say $75k or less).
If one or both of the spouses are under 65 and the couple doesn't qualify for Obamacare subsidies (which is quite easy to have too much income), the Gold plan premiums are in excess of $900/mo per person. Even the cheapest Bronze plans are in the mid-600s and higher. Medicare plus supplemental plus Plan D adds a few more hundred per month.
Under such a scenario, a lot of the monthly premiums will be in excess of the AGI threshold for medical deductions. Add that to a couple living in a high property tax state, plus the $4,100 exemption/person, plus $1,500/person aged 65 or older, and it's not that difficult to far exceed $24k in income deductions. Don't forget charitable contributions, any state/sales taxes, and/or mortgage interest (if still paying off a loan in retirement).