President-elect Donald Trump proposed big changes to the U.S. tax system during his successful run for the White House. Whether and how your taxes will change, however, are uncertain.
Why? Because the president doesn’t have the power to set tax policy or change tax rates. The Constitution gives that power to Congress.
If Congress were to back Trump’s wish list, here’s what could be in store for your tax bill.
Trump’s campaign tax proposal would affect virtually all taxpayers in some way, though it highlights high-income households and people with children. The impact of each proposal would depend on your individual tax situation.
Here’s a general rundown of what the Republican proposed during his presidential campaign.
Bottom line: Generally, most filers could move to a lower tax bracket. Those making $18,550 or less could move from the 10% to 12% bracket, though the Trump campaign says low-income Americans will have an effective income tax rate of 0%. Those making between about $225,000 and $231,450 could be bumped up from the 28% to the 33% bracket. Taxpayers in the top tax brackets of 35% and 39.6% ($413,350 or more for married filing jointly) could drop to 33%.
Also, the decision to itemize or take the standard deduction could get less tricky for some people, and people with lots of itemized deductions could have to reckon with the proposed cap. Single parents should keep an eye on the elimination of the head-of-household status. Couples filing jointly and making less than $311,300 could lose the personal exemption, though the overall shift to a lower tax bracket may (or may not) make up for the loss.
Bottom line: Child care and caregiving expenses are a significant target in Trump’s tax plan. Families making $62,400 or less could get a boost from the child care rebate.
Bottom line: Most estates aren’t subject to the estate tax now, so the proposals likely would affect only people who expect to inherit more than $5.45 million. Couples with incomes above $250,000 could get a reprieve from the ACA tax.
Trump’s tax wish list is long, but should you bank on every single part of it? You will have to wait and see. Changing the tax system is a job for Congress, after all, and running any proposal by 535 lawmakers for approval won’t be easy.
Tina Orem is a staff writer at NerdWallet, a personal finance website. Email: email@example.com.