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"Currently, filers are able to deduct $4,050 for themselves, their spouses and for each dependent. For a family of four, that means $16,200 is shielded from federal taxation. In addition to the current standard deduction of $6,350, up to $28,900 goes tax-free. The benefit phases out at higher income levels."
For the example of a family of 4, e.g. they gross household income is 200k, in 2017, their adjusted household income is (200k - 28900) = 171100. That put them into 33% bracket. Just to keep it simple, I just do 171100 * 33% = 56463 owe in tax.
With the new tax bill, since now they raise the income threshold to 400k, so a lot of people can claim $2000 per child tax credit. Their new adjusted income would be (200k - 24000). That put them into 28% tax bracket. 176000 * 28% means they owe 56000 tax. But now, they got 4000 tax credit, which means they actually owe 49280.
I know I was supposed to use marginal tax calculation. As I mentioned, I just want to keep the math simple. And probably not much difference if I use marginal tax calculation or not.
I know I was supposed to use marginal tax calculation. As I mentioned, I just want to keep the math simple. And probably not much difference if I use marginal tax calculation or not.
There is a BIG difference if you use the marginal tax calculation or not.
Rate Taxable Income Bracket Tax Owed
10%
$0 to $18,650 10% of taxable income
15%
$18,650 to $75,900 $1,865 plus 15% of the excess over $18,650
25%
$75,900 to $153,100 $10,452.50 plus 25% of the excess over $75,900
28%
$153,100 to $233,350 $29,752.50 plus 28% of the excess over $153,100
33%
$233,350 to $416,700 $52,222.50 plus 33% of the excess over $233,350
First of all, a couple filing jointly earning $200K will NOT be in the 33% bracket, they will be in the 28% bracket BEFORE deductions. And only for around a quarter of their earnings. The first third is only around 14% effective rate.
My rough calculation results in around $33K payable, which yields an effective rate of 16-17%.
There is more to the tax bill than just the increase in the child tax credit and the loss of the personal exemptions that could have an impact. For example.
1. The marginal tax rates for the most part will be lower (the exception is the 10% bracket, and high end of the current 33% bracket)
2. The plan calls for a change in which the brackets are indexed from year to year. They are switching from CPI to the slower chained CPI which means brackets will go up at a slightly slower rate each year n (this is probably the least discussed change of the tax bill)
3. The cuts to the rates expire in 2025.
4. There is a limit of $10,000 for State and Local Tax Deductions.
To answer your question, for the short-term if they rent or currently take the standard deduction they would likely benefit. If they own a home and itemize, they could likely pay more depending on what their property taxes are. How close the child is to 17 would also obviously determine how long they would see a benefit from the increased child tax credit.
I stated many years ago I wanted to write a book "The Pussifaction of America" I believe this started in 1992 when Stella Liebeck successfully sued McDonalds and won 3mm because the coffee was to hot!
One of the most devastating moments in modern US history.
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Long Island are you
