Americans shocked by impact of new tax law
The Tax Cuts and Jobs Act (TCJA), signed into law by President Donald Trump in December 2017, had a significant impact on Americans. Here are some of the ways in which the law affected individuals and families:
- Tax brackets and rates: The TCJA reduced the number of tax brackets from seven to four, with rates ranging from 10% to 37%. This change affected many Americans, particularly those in the middle and upper-middle class.
- Standard deduction: The law nearly doubled the standard deduction, which is the amount of income that is not subject to taxation. This change benefited many Americans, especially those who do not itemize their deductions.
- State and local tax (SALT) deductions: The TCJA capped the SALT deduction at $10,000, which affected individuals who live in high-tax states and localities. This change was particularly felt by those in the Northeast and West Coast.
- Mortgage interest deduction: The law reduced the mortgage interest deduction from $1 million to $750,000, which affected homeowners who had larger mortgages.
- Child tax credit: The TCJA doubled the child tax credit to $2,000 per child, but also limited the credit to families with incomes below $400,000.
- Estate tax: The law doubled the estate tax exemption to $11.2 million per individual, which affected wealthy Americans who had previously been subject to the estate tax.
- Pass-through businesses: The TCJA provided a 20% deduction for pass-through businesses, such as partnerships and S corporations, which affected many small business owners and entrepreneurs.
- Health insurance: The law eliminated the individual mandate penalty, which was a key provision of the Affordable Care Act (ACA). This change has led to uncertainty and instability in the individual health insurance market.
Some of the reactions to the TCJA from Americans include:
- Confusion and complexity: Many Americans found the new tax law to be complex and difficult to understand, leading to frustration and anxiety.
- Disappointment: Some individuals and families felt that the law did not benefit them as much as they had hoped, particularly those who had previously itemized their deductions.
- Relief: Others welcomed the changes, particularly the reduction in tax rates and the increased standard deduction.
- Uncertainty: The law's impact on certain industries, such as healthcare and real estate, has created uncertainty and has led to changes in business and investment decisions.
Overall, the TCJA had a significant impact on Americans, and its effects are still being felt today.