Will The New Tax Law Affect You If Signed Into Law? How?

So many stories are floating around about what the new tax law means that I felt it was time for me to once again do what I did with the health care law and break down the changes for you line-by-line; as best I can. As with the ACA, this is a major bill that is way too big for me to cover in its entirety. As such, I will highlight the major areas. However, rest assured that I am reading the bill in its entirety. I will start with the amendments then continue with the bill from the start.

The likelihood that HR1: The Tax Cuts and Jobs Act, which has now passed both the House & the Senate with promise of being signed into law by the President, will actually become law is pretty high.

Because this is long, I will also do as I did with the ACA and will post this as I get each section finished. I'm simply working this around my life as I can and will add to it as I'm able.

For most of these changes, I'm not going to give my opinion on them one way or the other. I'm just giving the facts, Mam!

Bottom line, though? The lower class and lower middle classes will be hit HARD.

Shall we get started?

*Right off the bat, there are some obvious changes to the Earned Income Credit.

Current income limits:                                              New law limits:

                         Single     /  Joint                                  Single    /   Joint
-No children:  $15,010   /   $20,600                          $16,969   /   $24,969
-1 child:          $39,617   /   $45,207                          $15,000   /   $20,550
-2 children:     $45,007   /   $50,597                          $15,000   /   $20,550
-3 children:     $48,340   /   $53,930                          $15,000   /   $20,550

Plus, at the maximum amount of income earned, the amount received will be less. Current amounts earned at the maximum income amounts vs. new amounts at max income amounts:

Current income limits:                                              New law limits:

                         Single    /   Joint                                  Single    /   Joint
-No children:  $510       /    $510                               $3,928      /    $5,780
-1 child:          $3,400    /    $3,400                            $3,578      /    $4,901
-2 children:     $5,616    /    $5,616                            $3,675      /    $5,035
-3 children:     $6,318    /    $6,318                            $4,456      /    $6,103

The new system is clearly designed to favor and reward those who are married and those with no children; regardless of marital status.

*Minimum tax rates & taxes due on higher income brackets defined as incomes starting at $200,000 increases. (All of the numbers below use standard deductions rather than itemized for simplicity. I have also rounded the numbers for simplicity and space.)

                                                           2016 tax tables:             New law tax tables:

Ind:         $190K-$413K         $46K   +33% over $190K                    n/a
Ind:         $413K-$415K         $120K +35% over $413K                    n/a
Ind:         $415K+                   $121K +39.6% over $415K                 n/a
Ind:         $200K-$427K                       n/a                         $46K  +35% over $200K
Ind:         $427K+                                 n/a                         $125K +39.6% over $427K
Mar, jt:    $231K-$413K         $52K   +33% over $231K                   n/a
Mar, jt:    $413K-$467K         $112K +35% over $413K                   n/a
Mar, jt:    $467K +                  $131K +39.6% over $467K                n/a
Mar, jt:    $400K-$480K                     n/a                          $91K +35% over $400K
Mar, jt:    $480K+                               n/a                          $119K +39.6% over $480K 
Mar, sep: $116K-$207K        $26K  +33% over $116K                     n/a
Mar, sep: $207K-$233K        $56K  +35% over $207K                     n/a
Mar, sep: $233K+                  $65K  +39.6% over $233K                  n/a
Mar, sep: $200K-$240K                    n/a                          $46K +35% over $200K
Mar, sep: $240K+                              n/a                          $60K +39.6% over $240K
HOH:      $130K-$211K       $27K   +28% over $130K                     n/a
HOH:      $211K-$413K       $49K   +33% over $211K                     n/a
HOH:      $413K-$441K       $116K +35% over $413K                     n/a
HOH:      $441K+                $126K +39.6% over $441K                   n/a
HOH:      $200K-$453K                    n/a                        $44K   +35% over $200K
HOH:      $453K+                              n/a                        $133K +39.6% over $453K

Basically, unless your income is over $200,000, you won't be affected by this change. If it does, then you might be; regardless of how you file your taxes.

*The corporate tax rate is increased from 20% to 28%. If you think this won't affect you, as the consumer, even though your taxes aren't personally being raised here...then you don't understand how business works.

*A "charitable" deduction will be allowed for 25% of tuition payments made for "qualified religious instruction" between December 31, 2018 and January 1, 2021.

What qualifies as "qualified religious instruction"?  I will quote, verbatim,
  "For purposes of this subsection, the term `qualified religious instruction' means academic instruction or training regarding a particular religion (including tenets, doctrines, beliefs, rituals, customs, and rites) of a type not generally offered in public school curricula, which is provided by a teacher or other instructor who is certified as having had significant post-
 secondary religious studies."
So there you have it. For the record (warning, opinion ahead) I don't agree with this measure. Yes, I am a Christian. No, I do NOT agree with this. I don't believe the government should be giving a deduction for some types of education if it is not giving a deduction for all types of education...and to that end, allowing those with kids in public school deduct expenses THEY spend on their kids as well. Because anyone with a child in public school knows that a public school education isn't a free one either. But I digress.

*The mandatory health insurance tax imposed through the Affordable Care Act is hereby repealed through this bill. To confirm all of what this bill repeals, I would have to go back and read the entirety of the referenced sections of the ACA which are being struck through and mentioned as being repealed. However, the only thing specifically mentioned as being repealed is the health care tax. As such, it is the only thing I will mention. That being said, it appears, based on the wording, that there is a large section of the ACA that would actually be repealed should this bill be signed into law. As someone who has benefited from portions of the ACA, I find this a bit disheartening. While I didn't think the ACA was the best solution, it was better than nothing. It was a start.

*The Dependent Care Credit will see changes:

                                                          Current Limits:                      Changes with This Bill:

Income limit to receive full credit:   $15,000                                  $30,000
% of allowable expenses:                  35%                                        50%
% of allowable expenses:                  20%                                        35%
Dollar amount credited-low end       $3,000                                     $6,000
Dollar amount credited-high end      $6,000                                     $12,000
Refundable credit?                            No-not currently                     Yes, this will become refundable

*Tax credits will be extended for alternative fuel vehicles. Previously, this credit had expired on December 31, 2016. However, this credit has now been extended to December 31, 2021 which means it should cover anyone who purchased an alternative fuel vehicle this year as well.

*The amount a person can gift you after death without taxes has been lowered to $9,149 per year.  After that:

$9,150-$12,700 = taxes $1,839 + 35% over $9,150
Over $12,700 = taxes $3,082 + 39.6% over $12,700

*I'm not going to list all of the details as it varies and in some cases, they've removed the amounts (odd) and have just left it open for interpretation (I guess?), but tax benefits have also been extended for the following energy efficiency items. Most of these had previously expired on December 31, 2016 as well.

-Solar electric (extended until 12/31/21)
-Solar water heating (extended until 12/31/21)
-Wind energy
-Fiber Optic, solar cell, geothermal cell...and I don't know what other kind of crap they listed here. Sorry, guys. This is way out of my league. I need an engineer or someone who understands this stuff to write this part of it, I guess.

*The President doesn't benefit by this act. Seriously. There's a section in there that "certifies" this. *eye roll*

*Permanent income tax relief for the middle class. Whereas the previous section laid out income brackets where taxes where increasing, this section details income brackets where taxes will decrease. (Again, all of the numbers below use standard deductions rather than itemized for simplicity. I have also rounded the numbers for simplicity and space.)

                                               2016 tax tables:                New law tax tables:

Ind:         $0K-$9K              10% of taxable income              same
Ind:         $9K-$38K            $928 +15% over $9K     $952 +12% over $9K
Ind:         $38K-91K            $5K +25% over $38K                  n/a
Ind:         $39K-$70K                        n/a                    $4K  +22% over $39K
Ind:         $70K-$160K                      n/a                    $11K +24% over $70K
Ind:         $160K-200K                      n/a                    $33K +32% over $160K
Mar, jt:    $0K-$19K           10% of taxable income               same
Mar, jt:    $19K-$75K         $2K +15% over $19K     $2K +12% over $19K
Mar, jt:    $75K-$152K       $10K +25% over $75K   $9K +22% over $77K
Mar, jt:    $152K-$231K     $30K +28% over $152K                n/a
Mar, jt:    $140K-$320K                   n/                        $23K +24% over $140K
Mar, jt:    $320K-$400K                   n/a                      $66K +32% over $320K
Mar, sep: $0K-$9K            10% of taxable income                 same
Mar, sep: $9K-$38K          $928 +15% over $9K       $952 +12% over $9K
Mar, sep: $38K-$76K        $5K +25% over $38K      $5K +22% over $38K
Mar, sep: $76K-$116K      $15K +28% over $76K                   n/a
Mar, sep: $70K-$160K                    n/a                       $11K +24% over $70K
Mar, sep: $160K-$200K                  n/a                       $33K +32% over $160K
HOH:      $0K-$13K         10% of taxable income                   same
HOH:      $13K-$50K       $1K   +15% over $13K      $1K   +12% over $13K
HOH:      $50K-$130K     $7K   +25% over $50K                     n/a
HOH:      $52K-$70K                    n/a                          $6K   +22% over $52K
HOH:      $70K-$160K                  n/a                          $10K +24% over $70K
HOH:      $160K-$200K                n/a                          $32K +32% over $160K

*"Qualified military spouse" for the Work Opportunity Tax Credit for Military Spouses is amended to define a "Qualified Military Spouse" as:

  "The term 'qualified military spouse' means the spouse or domestic partner (as recognized under State law or by the Armed Forces) of a member of the Armed Forces.''

I will read and add more later, but I'll have to stop there for now.

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