Well, it’s official. Washington has passed a sweeping tax reform bill not seen in decades. The bill passed just before the holidays, signaling the potential for another strong year in the American economy.
Curious about the new tax code? We have boiled down five aspects of the tax bill you should know:
- Individual income taxes retain seven bracket structure, but at reduced rates and includes a top marginal rate of 37%.
- Increases standard deduction to $12,000 for single filers, $18,000 for heads of households, and $24,000 for joint filers.
- Lowers most individual income tax rates. Taxpayers could see after-tax earnings increase by as much as 2.65%, specifically for the middle class.
- Supplemental wage decrease to 22% from 25%. Read more about supplemental wages.
- Individual income tax changes are temporary. Unless new legislation is passed, the individual tax changes will expire December 31, 2025.
How Will Tax Changes Impact The American Economy?
According to the Tax Foundation, the recent changes will have a profound influence on the economy. Below are a few estimates regarding the economic impact of the Tax Cuts and Jobs Act:
- Change in long-run GDP: 1.7%
- Change in long-run capital stock: 4.8%
- Change in long-run wage rate: 1.5%
- Change in long-run full-time equivalent jobs: 339,000
2018 tax changes stressing you out? No need to worry, PaycheckCity has a Tax Reform Calculator and Interactive Graph to show the impact of 2018 tax changes on your paycheck!
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.