After President Trump proposed some big changes to the U.S. tax system on the 2016 campaign trail, we’re now getting a glimpse into how the new administration’s plans could impact the tax bills of everyday Americans.
The White House recently unveiled a broad outline that presents a significantly simpler tax code — with proposed changes that would affect most Americans in some way, depending on your individual situation.
Here’s a look at some key changes proposed by the President’s new plan and how what it means for you.
Trump’s new tax plan and how it may impact you
Fewer tax brackets
The new plan would reduce the number of federal tax brackets from seven to only three, with tax rates at 10%, 25% and 35%.
The current tax brackets range from 10% to 39.6%, based on annual income. So under the proposed changes, taxpayers with high and middle incomes could get an immediate break on their income taxes.
However, we won’t know exactly what to expect until the White House reveals the income ranges for the new tax brackets (which is not included in the proposed plan).
Eliminating several deductions
All individual tax deductions would be gone, expect for those related to homeownership and charitable contributions. That means taxpayers would no longer be able to write off things like state and local taxes, as well as medical expenses.
Since the plan is not final, details surrounding specific deductions could change, based on reaction from Congress and certain things lawmakers want to keep in place for their home state.
Larger standard deduction would reduce tax bills
Trump’s proposed plan would double the standard deduction offered by the IRS that people can claim on their federal income tax return. This deduction is subtracted from your adjusted gross income, which lowers your taxable income.
The current standard deduction is $12,700 for joint filers and $6,350 for single filers. The new plan would roughly double those numbers — so a married couple filing jointly wouldn’t owe income taxes on the first $24,000 of income.
By giving taxpayers a way to reduce their taxable income without several itemized deduction, the change lead to a simpler tax return.
Bigger tax breaks for parents
The new plan proposes increasing the tax benefits available to people with child and dependent care costs — things like day care.
While the plan provides few details about these changes, a few things Trump is considering include raising the Child and Dependent Care Tax credit, a child care spending rebate for low-income families and deductible contributions to Dependent Care Savings Accounts.
What the new plan would repeal
- Alternative minimum tax
- Estate tax
- Affordable Care Act net investment income tax
Lower corporate tax rate and extend the benefit to small and medium-sized businesses
The new plan would reduce the corporate tax rate to 15% and provide a tax break for freelancers, people who are self-employed, as well as companies. However, until more details are released, it’s unclear how much that will be.
What the new proposal does not include
There are several details that have not yet been revealed by the Trump administration related to various key changes to the tax system.
For example, until we know more about the tax brackets, it’s difficult to determine which taxpayers will benefit most from the new changes.
We’ll continue to update you as we learn more.
Find out how the Trump tax plan may affect your taxes
At this point, you’re probably wondering how President Trump’s policies may impact you and your life — and there’s a tool that may be able to help!
After the President released his new plan, The New York Times put together a calculator that shows you how your taxes could change under the proposed policies.