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.
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