The talking heads on cable news have gone into overdrive in recent months, debating the impact of congress’s promised tax reform on American families. Their view of its impact ranges from flawless to apocalyptic, their confidence ranging from speculation to declaration.
It’s no wonder so many Americans feel left in the dark about the true impact of the changes that will affect their pocket books in real and tangible ways. While the changes are only half-baked, a number of the most significant changes are now coming into view. And some of them could have real impact on families. Here’s what we know so far:
Fewer tax brackets
The proposed plan reduces the number of income brackets to three, with rates simplified to 12%, 25%, and 35%. The bottom bracket represents an increase, up from 10%, for the lowest income earners. Meanwhile, top earners get a break, down from 39.6%.
Increased standard deduction & child tax credit
The standard deduction (the amount middle-income earners are able to subtract from their income without itemizing deductible expenses) is set to double. Additionally, the child tax credit is slated to increase. The amount is uncertain, but many are expecting an additional $500 per child in tax relief.
Lower taxes for small businesses
The top percentage paid by small and family-owned business would cap out at 25% under the new plan, a sharp reduction for select small businesses in higher tax brackets. Run a successful small business with your family? You may be in luck.
Mortgage interest is safe; other loopholes are not
One of the most debated deductions–the mortgage interest deduction–appears to be safe, while other deductions congress labels as “loopholes used by the wealthy” are set to be eliminated. One uncertain deduction that could impact families: the state and local tax deduction. Mum’s the word on its status. But good news for the generous: the charitable contribution deduction will remain.
Other changes set to go into effect will have little impact on the average American family, but will certainly earn their fair share of debate on Capitol Hill. They include a decrease in the corporate tax rate, a change in the way business are able to write off large capital expenses, and a temporary low tax to encourage corporations to bring offshored funds back to the States.
Whatever Comes, TaxSlayer Has Your Back
No matter what changes this tax season brings, there’s one way to guarantee that you’ll be in the know when it comes time to file. Its name? TaxSlayer. You can rest assured that we’ll be keeping tabs on every change to the tax code and optimizing our tools to simplify your filing process.
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