Now that the House and Senate have both passed their own versions of updated tax plans, details are starting to come together to show how the changes will potentially affect taxpayers. President Donald Trump is hoping a finalized plan, likely created by reconciling differences between the two versions, will be available for him to sign by Christmas.
Trump has been pushing for a simplified system in comparison to the tax brackets used today. While the final plan could use either the House or Senate’s version of the brackets, or an adjustment designed to resolve the differences between the two, the currently available information gives indications into what taxpayers could potentially expect for the 2018 tax year.
Business Insider produced two charts that show how the different plans compare to the 2017 tax brackets, which are based on current law.
This first chart applies to single filers, outlining the shifts in the brackets as well as changes to the standard deduction and personal exemption.
The second chart provides the same information, but for married taxpayers filing jointly.
The House plan reduces the total number of brackets from seven to four, while the Senate plan maintains the seven brackets, but included adjustments to the rates and income ranges assigned to each one.
Approximately 70 percent of Americans claim the standard deduction on their taxes, which is set to increase in both the House and Senate versions. That means that these tax filers will feel some benefit from this change, even with the removal of the personal exemption.
However, certain other deductions may be removed or scaled back. For example, the House plan eliminates the state and local income tax deduction and the student loan interest deduction. The mortgage deduction would remain, though the amount that is eligible to be deducted is reduced. 401(k) savings would still be deductible.
Since the two plans have to be reconciled, or the House has to decide to take up the Senate’s version, it still is not known precisely what the finalized plan will look like, especially since conversations in Congress surrounding the tax plans are fairly complex.
“We have to acknowledge that any effort to cut or reform taxes is inevitably more complicated than tackling healthcare, said senior economic analysts at Bankrate.com Mark Hamrick. “Healthcare involves around one-sixth of the US economy, while taxes covers pretty much everything. That makes the broader fight even larger and more complicated.”