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What Does the Tax Reform Bill Mean for Low-Income Earners?

Aside from lowering the statutory corporate tax rate from 35% to 21%—perhaps the most well-known facet of the tax plan—this bill lowers several individual rates and makes key changes to the tax code that affect low-income earners.

The tax reform bill does not reduce the number of individual brackets, but it does lower the rates for five of the seven:

Old Tax Brackets

Single Filers Tax Filing Jointly Tax
Over But not over % Over But not over %
$0 $9,325 10% $0 $18,650 10%
$9,325 $37,950 15% $18,650 $75,900 15%
$37,950 $91,900 25% $75,900 $153,100 25%
$91,900 $191,650 28% $153,100 $233,350 28%
$191,650 $416,700 33% $233,350 $416,700 33%
$416,700 $418,400 35% $416,700 $470,700 35%
$418,400 39.6% $470,700 39.6%

New Tax Brackets

Single Filers Tax Filing Jointly Tax
Over But not over % Over But not over %
$0 $9,525 10% $0 $19,050 10%
$9,525 $38,700 12% $19,050 $77,400 12%
$38,700 $82,500 22% $77,400 $165,000 22%
$82,500 $157,500 24% $165,000 $315,000 24%
$157,500 $200,000 32% $315,000 $400,000 32%
$200,000 $500,000 35% $400,000 $600,000 35%
$500,000 37% $600,000 37%

Other Important Tax Changes

While personal exemptions are eliminated, the standard deduction is increased from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married filing joint filers. Another change that’s likely to impact low-income taxpayers is the adjustment to family tax credits.

The Child Tax Credit (CTC) is being doubled from $1,000 to $2,000, and the refundable portion will be increased from $1,100 to $1,400, which will likely result in lower-income families seeing CTC-related refund dollars.

Source: https://taxingsubjects.com/our-blog/taxnews/tax-reform-bill-heads-presidents-desk/

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