Single, childless taxpayer, $25,000 salary
Single, childless taxpayer, $75,000 salary
Single, childless taxpayer, $175,000 salary
Fewer Tax Brackets
The president’s plan would consolidate the existing seven tax brackets into just three, lowering the tax rate for the wealthiest Americans while raising it slightly for people at the bottom of the scale.
No More Exemptions
The plan also calls for simplifying the tax code by eliminating many of the deductions and exemptions that currently exist.
An exemption is a standard amount taken off a taxpayer’s taxable income for themselves, as well as any of their dependents. Single people can typically deduct $4,050 off their taxable income for themselves, and another $4,050 for each dependent.
Trump’s plan would eliminate those exemptions entirely, instead nearly doubling standard deductions, which also reduce taxable income.
Taxpayers have an option to itemize deductions or take a standard deduction from their taxable income at a rate set by the IRS. For 2017, the standard deduction for individuals will be $6,350, or $12,700 for a married couple.
The reform would nearly double the standard deduction to $12,000 for a single person or $24,000 for a married couple. About 70 percent of taxpayers take the standard deduction rather than itemizing, according to the Tax Policy Institute.
Republicans have billed the doubling as a “zero tax bracket,” and say it would offset the slight increase in the bottom tax rate from 10 percent to 12 percent.
The change could hurt families with many children, since married couples will be limited to a new $24,000 deduction, rather than receiving an additional exemption of $4,050 per child. Trump’s plan said it will increase the Child Tax Credit to offset this, but did not specify by how much. The plan also promised additional middle-class tax relief.