WASHINGTON (CBSMiami) – Now that Republicans in Congress have passed their tax reform plan, many Americans are wondering how much they will save next year.
The answer is – it depends.
The $1.5 trillion tax cut makes major changes to current laws. But your personal situation will determine just how much of a tax cut you’ll receive.
First off, most Americans will pay a lower tax rate. Top earners drop from 39.6 to 37 percent while low-income earners stay at 10 percent.
CBS News business analyst Jill Schlesinger says a vast majority of Americans will see a tax cut next year. A big reason why is because Republicans nearly doubled the standard deduction. For single filers, the standard deduction has increased from $6,350 to $12,000; for married couples filing jointly, it’s increased from $12,700 to $24,000.
“As a result, there are going to be more people who are going to be able to claim that standard deduction and they will get some relief,” said Schlesinger.
But returns can vary widely because of several factors – like where you live and how many children you have.
H & R Block says a married couple with two children in San Diego making $150,000 a year will save almost $3,600. That’s because their tax bracket drops from 25 percent to 22 percent. They’ll also take the $24,000 standard deduction since it’s more than itemizing mortgage interest, charitable contributions, and taxes. They’ll also take advantage of the child tax credit doubling from $1,000 to $2,000.
A single parent with two kids renting in Kansas City, Missouri would save $1,800 thanks to the higher standard deduction and child credit. But a single homeowner in Queens, New York will only get $100 more. That’s because the $15,000 in state, local, and property taxes they used to deduct is now capped at $10,000 under the new plan.
While most Americans will be getting more money back in the coming years, many of these tax breaks will expire in 2025 and millions will end up paying more in taxes than they are right now.
But while personal tax breaks will expire, the cuts to corporate tax rates are permanent.