From the beginning of his quest for the presidency, Donald Trump promised millions of Americans that he would strive for nationwide tax reform. Upon becoming President, he outlined his tax plan that would reform decades of tax policies in the United States. Some key features of the tax plan include: lowering the income requirement for filing income taxes, lowering corporate income taxes, eliminating three of the seven tax brackets that exist today, and eliminating the estate tax which taxes inheritance received from those who have passed away.
Over the past few weeks, President Donald Trump’s tax plan has been analyzed, debated and voted on by both bodies of Congress: the House of Representatives and the Senate. Before making its way to Senate, the GOP’s tax bill reached a 227-205 vote in the House of Representatives with 227 representatives voting in favor and 205 voting against it. This vote allowed for the tax bill to successfully travel past the U.S. House of Representatives – which is a rarity as most bills end up dying in the House – to the U.S. Senate. In the Senate, the bill was passed through a 51-49 vote with 51 senators voting in favor and 49 voting against it. Now, the bill will travel to joint House and Senate committees to finalize the bill which will then be sent to President Trump to sign into law.
However, there were some changes made to President Trump’s tax plan in order for it to pass in the Senate. Now, the Tax Reconciliation Act includes the following guidelines:
1. The seven tax brackets are to remain but they will have lower taxable income rates.
2. It eliminates personal income tax exemptions but it increases the child tax credit by $1,000. 3. The estate tax remains but nearly the entire U.S. population is exempt from it
4. It eliminates the fine for not being covered under a health insurance policy – a part of President Obama’s Affordable Care Act – which paves the path for healthcare reform in the future.
5. It doubles the amount of money that educators can deduct from their income taxes for buying supplies for their classrooms.
6. It increases the tax deduction you can receive from the interest of your mortgage.
7. It lowers the corporate income taxes in one year.
Despite criticism that the tax bill will create financial struggle for middle class families, it actually seeks to implement financial relief for millions of Americans. Depending on their income, some Americans may not even be required to file income taxes and those that do will receive more tax credits and deductions from their income taxes. Middle class families will be able to save more money when it comes to filing their income taxes and they will receive more money from their tax returns.
If President Trump signs this act into law, changes will not be implemented until all income taxes are filed for 2017 – which has an IRS deadline of April 17, 2018 – so the new guidelines would be applied to income taxes filed for 2018.