Tax Rates

Last week House Republicans released the Tax Cuts and Jobs Act. This is their most recent tax reform bill that restructures the current tax rates. The plan calls for a reduction in the number of tax rates from seven to four with income brackets that will continue to be indexed for inflation. The ordinary income tax rates are listed below for the current tax law using the 2018 brackets and rates released by the Internal Revenue Service and the Tax Cuts and Jobs Act.

Current Law

House GOP

Single Brackets

Married Brackets

10%

12%

$0 to $9,525

$0 to $19,050

15%

12%

$9,526 to $38,700

$19,051 to $77,400

25%

12%

$38,701 to $45,000

$77,401 to $90,000

25%

25%

$45,001 to $93,700

$90,001 to $156,150

28%

25%

$93,701 to $195,450

$156,151 to $237,950

33%

25%

$195,451 to $200,000

$237,951 to $260,000

33%

35%

$200,001 to $424,950

$260,001 to $424,950

35%

35%

$424,951 to $426,700

$424,9511 to $480,050

39.6%

35%

$426,701 to $500,000

$480,051 to $1,000,000

39.6%

39.6%

$500,001+

$1,000,000+

The bill increases the current standard deduction from $6,350 to $12,000 for single filers and from $12,700 to $24,400 for married couples. There is an increase in the child tax credit from $1,000 to $1,600 with an additional $300 for any parent or non-child dependent. Property tax deductions will be limited to up to $10,000 for most taxpayers.

The House GOP tax reform proposal does not directly change the tax rates on capital gains, qualified dividends and interest income. Although some investors may pay fewer taxes on short-term capital gains and dividends if their ordinary income rate decreases because of the new rates.

While tax rates appears to be an area that the Congress and President Trump agree upon, these rates may change due to budgetary and revenue concerns. The Senate Finance Committee released its own version of the Tax Cuts and Jobs Act on November 9, 2017 keeping seven tax brackets but lowers some of the rates. However, they have not yet released income levels assigned to the brackets of 10%, 12%, 22.5%, 25%, 32.5%, 35% and 39.6%. We will continue to update the rate tables based upon any subsequent information received related to the tax reform plans.