Tax Bill Update: What It Means for Parents
The Senate weighed in—and voted in—a 500-page tax bill that makes significant changes from the one the House passed last month. And many of these changes may not be as popular with most families (unless you're one of the few who's really excited for that private plane deduction). Here's what changed with the Senate version of the bill:
Back to seven tax brackets
The House version cut the number of tax brackets down to four, but the Senate version keeps the same number of brackets as the current system and reduces the rates slightly for most of them:
- 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)- 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
- 22% (over $38,700 to $70,000; over $77,400 to $140,000 for couples)
- 24% (over $70,000 to $160,000; over $140,000 to $320,000 for couples)
- 32% (over $160,000 to $200,000; over $320,000 to $400,000 for couples)
- 35% (over $200,000 to $500,000; over $400,000 to $1 million for couples
- 38.5% (over $500,000; over $1 million for couples)
No more healthcare mandate
You won't have to pay a penalty if you decide not to buy health insurance, as you did under the current plan.
A slight dip in the standard deduction—and a slight increase in the child credit.
The House made the standard deduction for a married couple $24,400, and for a single payer $12,200. The Senate reduced those numbers to $24,000 and $12,000. However, you'll get more dough for each child—$2,000 instead of the House's $1600. (However, keep in mind that this credit is nonrefundable, so if you don't pay much in taxes, you might not see the benefit of the boost in the deduction.)
Keeps the current student loan and graduate tuition policies in place
The House bill was lambasted for removing the student loan deduction and the graduate tuition deduction, which would have led to many students and recent graduates paying much higher taxes. The Senate bill keeps things as they currently are on these two fronts.
Allows more people to deduct medical expenses—for a while
The Senate bill adjusted the medical expense deduction down slightly—so families who have medical bills that exceed 7.5% of their income can now claim the deduction. (The House bill got rid of the deduction.)
Still no SALT deductions
The property tax deduction was included in the Senate bill, though capped at $10,000. But the state and local taxes paid can no longer be deducted on taxes, severely affecting people in New York, New Jersey, California and other high-tax states.
Deductions for religious education are included
Parents can deduct the cost of private religious school from their taxes.
Big breaks for corporations
The biggest tax breaks are reserved for the biggest companies—who will now pay 20% tax, vs. the current 35%. Experts believe most of that savings will be passed to investors, not to employees.
The bill now needs to be reconciled with the House bill, where both houses wheel and deal their way to a bill that has the votes to pass the House and the Senate. if you're not happy with any part of the bill—or want to voice your support for anything they've added to the bill, now is the time to call your representative at (202) 224-3121.