Will the GOP’s tax reform bill result in a lower tax bill for you?
Congressional GOP leaders have passed a tax cut plan and it could have a significant impact on your federal income tax bill in 2018 and beyond.
To give you a sense of how your taxes could be affected, here are five situations and how the new tax bill could affect each one.
1. A single filer with $50,000 in annual adjusted gross income (AGI) and who uses the standard deduction currently.
First, let’s look at a simple tax situation. Under the current tax law, a single filer would be entitled to a $6,500 standard deduction in 2018 and a personal exemption of $4,150, which would leave this taxpayer with taxable income of $39,350. Plugging this into the current-law 2018 tax brackets shows that this individual would pay $5,491 for the year.
Under the GOP’s tax bill, single individuals would get a $12,000 standard deduction, but no more personal exemption, which would lower this person’s taxable income to $38,000. Using the GOP’s new tax brackets, not only would this taxpayer have a lower taxable income, but he or she would be subject to a lower marginal tax rate on most of that income. In fact, the new tax brackets would result in a 2018 federal income tax of $4,370, a savings of $1,121. So it’s fair to say that middle-income taxpayers with simple tax situations like this could save a significant amount of money.