This week, the Republicans in the House of Representatives FINALLY revealed their version of President Donald Trump’s Make America Great Again tax plan. In it are many of the promises that the president made, like reducing the corporate tax rate from 35% to 20% to make the country more competitive for large businesses internationally. But that isn’t likely to be something that everyday Americans will see in their own budgets. There are, however, some features that will.
Fewer Tax Brackets
President Trump talked quite a bit about simplifying the tax code, and Congress gave him four brackets instead of seven: below $45,000 12%; $45,000 and $200,000 25%; $200,000 and $500,000 will be taxed at 35%; and the top bracket begins at $418,000.
Mortgage Deduction Limits
The deduction is currently available for mortgages up to $1 million. This plan drops that upper limit to $500,000. Geography tells those who pay attention that this will impact areas that tend to vote Democrat.
No More Medical Expense Deductions
Yes, you read that right. People who spend out of pocket for medical expenses no longer will be able to deduct that sum. Also gone are the deduction lines for student loan interest and adoption.
Just A Little Bit Of An Increase In The Child Tax Credit
This bill puts the Child Tax Credit at $1600. It’s not much, but better than the non-child dependent credit of $300 that disappears as of 2022.
State Tax Liability – GONE
This one may be harder than some of the others to swallow. No more deducting the amount paid to the various states at various levels. Some states are more vulnerable on this one than others.
The goal here is not to outright punish or stick the bill to any one demographic. Rather, it is to simplify the tax code which requires a dolly to move when it is printed out, there is so much red tape in the system. Some of the changes are going to be loved. Some hated. All will require a change in thinking if the plan is passed as is. Whether or not that happens remains to be seen.