4 Reasons People Should Be Happy With Donald Trump’s Impact on Taxes01/20/2021
The 2017 Tax Cuts and Jobs Act (TCJA) was the defining legislation of Donald Trump’s presidency. It took effect starting in tax year 2018 and was revised several times since, but its major components are still intact. The administration pitched it as a badly needed overhaul of the tax code that would reduce the tax burden for most and simplify the process of filing and paying for millions. Detractors said that it was a giveaway to the rich and corporate America that further redistributed wealth away from the middle class in favor of the highest earners.
The Other View: 4 Reasons People Should Not Be Happy With Donald Trump’s Impact on Taxes
The truth is somewhere in between, but one thing is certain. The TCJA was a before-and-after moment that changed the American tax system — and for many, many taxpayers, it led to a bigger refund.
If you’re one of the lucky ones whose Aprils have been made brighter by refunds that have gotten bigger since the passage of the TCJA, you might have Donald Trump to thank.
The TCJA Gave Most Households a Tax Cut
According to the Tax Policy Center, the TCJA resulted in the average tax bill being lowered by $1,610. That, however, is just the average. The cuts were spread unevenly across the tax brackets and the lion’s share of the gains went to the highest earners. According to NPR, those earning between $500,000 and $1 million kept 4.3% more of their incomes after Trump’s law compared to just 1.6% more for those earning between $50,000 and $75,000. Uneven as the cuts were, the truth is that most Americans owed the government less after Trump’s tax reforms, which might be why your refund is bigger.
The Tax Rates Are Lower Now
The most obvious way the TCJA lowered taxes is by reducing the percentage owed for each tax bracket except the very lowest and one near the top. The lowest-earning bracket remained at 10%, but the next-lowest shrank from 15% to 12%. The next three were lowered from 25% to 22%, 28% to 24%, and 33% to 32%. The 35% tax bracket stayed the same, but the top bracket for the highest earners dropped from 39.6% to 37%.
Read More: All the New Numbers You Need To Know for Planning Ahead on Taxes
The Standard Deduction Is Way Higher
Trump’s tax law nearly doubled the standard deduction from $6,350 to $12,000 for individual filers. It has since increased to $12,400 for tax year 2020. The higher deduction reduces more of your taxable income, thereby lowering your tax obligation and potentially boosting your refund. As an added bonus, the changes made it logical for far more people to take the much simpler standard deduction instead of going through the pains of itemizing.
Find Out: 8 New or Improved Tax Credits and Breaks for Your 2020 Return
The Child Tax Credit Is Much More Valuable Now
The TCJA’s other major impact was the doubling of the Child Tax Credit. Now worth $2,000 instead of $1,000 for each qualifying dependent child, the Child Tax Credit is also available to many more taxpayers and is therefore responsible for many bigger refunds. Before Trump, the credit began phasing out at $75,000. The TCJA increased the income threshold all the way up to $200,000.
This article originally appeared on GOBankingRates.com: 4 Reasons People Should Be Happy With Donald Trump’s Impact on Taxes
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