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How the Senate Tax Bill Would Affect You, Based on Your Income

Shaina Mishkin
The Republican tax plan will cut taxes for most Americans -- at least in the short term.

The Republicans’ Senate tax bill, named the Republican Tax Cuts and Jobs Act, passed in the early hours of Saturday, Dec. 2. It could impact everything from health care to college savings. But how would the tax bill affect you personally?

While nothing is final until the House and Senate hash out a joint bill and it’s signed by President Donald Trump, number crunchers are already looking at how the tax bill would affect taxpayers.

On average, the Senate tax bill would drop taxes across all income groups in 2019 and 2025, according to the Tax Policy Center, a Washington think-tank. By 2027, however, individual tax cuts would lessen for most, with the nation’s lowest earners seeing more tax hikes than cuts on average.

Wondering how the Senate tax bill would affect you? Here’s everything you need to know.

The Lowest Earners

Who is affected: Taxpayers earning less than $25,400 a year

2019: Average tax cut of $40, or a 0.3% change in after-tax income

2025: Average tax cut of $50, or a 0.3% change in after-tax income

2027: Average tax hike of $20, or a -0.1% change in after-tax income

This group — which largely includes college students and seniors living on social security but also many part-time worker s— could benefit from the Senate tax bill’s expanded child credit, which would increase from $1,000 to $2,000 per child until age 18, and an increased standard deduction, which would double from $6,350 to $12,000 for individuals, $9,350 to $18,000 for heads of household and $12,700 to $24,000 for married couples filing jointly. On the other hand, the Senate tax bill’s elimination of the personal exemption, which currently allows filers to claim $4,050 for themselves and any dependents, could hurt taxpayers with children.

Most breaks from the tax bill, however, are only temporary. What starts as a tax cut in 2019 would become a hike by 2027 because many of the bill’s provisions, including the doubled standard deduction and expanded child credit, expire after 2025.

The Solid Middle Class

Who is affected: Taxpayers earning between $49,600 and $87,400 annually

2019: Average tax cut of $840, or a 1.4% change in after-tax income

2025: Average tax cut of $930, or a 1.3% change in after-tax income

2027: Average tax cut of $40, or a 0.1% change in after-tax income

From a striving urban professional earning $70,000 a year to a settled suburban family living on the same amount, the Senate tax bill’s implications for the middle class are as varied as its members.

Largely thanks to the doubled standard deduction, this group would initially receive an average tax cut of upwards of $800, the analysis says. In 2027, these average benefits would plunge to $40 as provisions expire.

Even within the same income bracket, however, different family situations lead to different outcomes. Single filers with no children who don’t itemize would benefit from the enlarged $12,000 standard deduction and, despite losing the personal exemption, would likely see a sizeable tax cut.

The same cannot be said for some middle class parents. For those with dependents, the elimination of the personal exemption could mean reporting more taxable income, even with the increased standard deduction — and thus higher taxes. Since families can currently claim a $4,050 exemption for both parents and each child, the tax bill’s elimination of the exemption would hurt largest families most.

The Wealthy

Who is affected: The top 20% of U.S. earners reporting an income greater than $150,000 annually

2019: Average tax cut of $5,420, or a 2% change in after-tax income

2025: Average tax cut of $6,540, or a 2% change in after-tax income

2027: Average tax cut of $1,860, or a 0.5% change in after-tax income

On average, wealthy taxpayers would see a 2% boost in after-tax income in both 2019 and 2025. The changes would benefit business owners far more than well-paid professionals like corporate executives, however. That’s because the cut comes in part from the tax bill’s treatment of pass-through income, which would allow some business owners to deduct 23% of their business’s income from their taxes.

Like those in lower quintiles, the wealthy’s initially large tax cuts would drop to a lower average after 2025 due to the plan’s expiring provisions.

The Super-Wealthy

Who is affected: The top .1% of U.S. earners taking home $3,587,300 or more a year

2019: Average tax cut of $61,920, or a 0.8% change in after-tax income

2025: Average tax cut of $152,200, or a 1.6% change in after-tax income

2027: Average tax cut of $182,030, or a 1.7% change in after-tax income

While most Americans would see the Senate tax bill’s proposed cuts disappear after 2025, the country’s wealthiest taxpayers would see benefits continue through 2027. That’s because while many individual tax provisions in the Senate tax bill expire in 2025, business ones — which tend to benefit the many business owners and stock market investors in this group — are permanent.