Tax bill

Anxiety levels have soared among the lower and middle class as the GOP instigates a tax bill overhaul proffering hefty cuts to corporations and the highest-earning 1%. But most income brackets will see a boost in take-home pay – a blip for some earners and a bump for others. Find out where you stand.

The tax brackets have shifted. What does that mean for me?

First, determine your tax rate based on your income bracket. In a nutshell, the middle class (defined by Pew Research as those earning $39,560-$118,080) sees their taxes slashed from 25 percent to 22 percent.

Here’s the good news for married taxpayers filing jointly: the Republican tax bill shifts the seven income brackets upwards, so that the larger tax rates are introduced at higher increments. Conversely, higher rates kick in earlier for middle-class single filers — but the well-heeled can take solace in knowing the highest tax bracket just jumped from $418,401 to $500,001 and up.

Tax brackets for single filers

Tax brackets for married taxpayers filing jointly

The personal exemption has been repealed! Does that mean I get a smaller tax deduction?

Not necessarily. Personal exemptions are for those who score a larger deduction by itemizing expenses such as a mortgage or state and local taxes, rather than accepting the standard deduction. In 2017, the standard deduction for a single taxpayer was $6,350 plus one personal exemption of $4,050 per taxpayer, usually claimed by those with incomes less than $100,000, which constitutes about 70 percent of Americans. The new law combines these into one larger standard deduction for 2018: $12,000 for single filers and $24,000 for joint filers (up from $12,700).

The hike in standard deductions most benefits childless married couples, while married couples claiming multiple dependents claim a more modest deduction ($24,000 regardless of income), potentially offset by an enhanced child tax credit of $2,000 per child under age 17 (up from $1,000).

Can I still itemize under Schedule A?

Yes, but beware of changes to Schedule A items. The bill imposes a $10,000 cap on state and local taxes (including property tax) which you can deduct from your federal income taxes, so if you reside in a high-tax state, you should budget accordingly. Furthermore, a number of items are no longer itemizable: casualty and theft losses (exempting areas beset by natural disaster), the cost of tax preparation, investment fees, bike commuting ($20/month), unreimbursed job expenses and moving expenses.

I’m looking to buy or sell a home. What should I be aware of?

Your current mortgage-interest deductions won’t be affected, but if you move, your mortgage deduction will shrink from $1 million to $750,000 for married filers and $500,000 to $375,000 for single filers. These adjustments could make homeownership less affordable in pricey markets.

So what’s the verdict?

See below for an at-a-glance rundown of your filing status.

You’re Single, with No Children You’re Married Filing Jointly, with No Children You’re Married Filing Jointly, with Two Children
  • Standard deduction increases from $6,350 to $12,000.
  • Personal exemptions decrease from $4,050 to $0.
  • Old tax break: $10,400.
  • New tax break: $12,000.
  • Standard deduction increases from $12,700 to $24,000.
  • Personal exemptions decrease from $8,100 to $0.
  • Old tax break: $21,100.
  • New tax break: $24,000.
  • Standard deduction increases from $12,700 to $24,000.
  • Personal exemptions decrease from $16,200 to $0.
  • Old tax break: $28,900.
  • New tax break: $24,000.