A newly introduced House tax bill holds the potential to provide massive financial relief directly to American taxpayers. It creates a number of new, refundable deductions including a $1,000 deduction for single filers and $2,000 for married couples filing jointly. We believe this legislation is a great step toward making that tax landscape much better. It will further make permanent the individual cuts enacted under the 2017 Tax Cuts & Jobs Act.
The legislation provides increased benefits for individuals with low, medium, and high incomes. As an example, a $1,000 deduction only saves individuals in the 10% tax bracket $100. For tax filers in the 35 percent bracket, that same $1,000 deduction would be worth an estimated $350 in tax savings. These figures are meant to show how the impact of these types of deductions differ based on where a taxpayer stands on the income scale.
Furthermore, the bill would reward American taxpayers by permanently extending many of the cuts in 2017’s Tax Cuts and Jobs Act. This change would be intended to provide a long-awaited continuity and predictability for the taxpayers as they look towards their own financial futures.
In 2025, the value of the standard deduction will increase to $15,000 for single filers. At the same time, married couples filing jointly will enjoy a very generous $30,000 deduction. Importantly, about 90% of taxpayers usually take the standard deduction instead of itemizing their deductions anyway. The new bill allows those who do not itemize to benefit from additional deductions: single filers can deduct up to $1,000, while married couples filing jointly can deduct up to $2,000.
The bill doesn’t stop there though, as the proposed legislation extends new deductions for other forms of income, specifically tipped and overtime income. This inclusion should help to further reduce the tax burden on lower-income earners and those in professions that rely on tips.
Erica York, vice president of federal tax policy at the Tax Foundation, commented on the potential impact of the bill:
“This could provide some tax savings for folks.”
For taxpayers waiting impatiently for this bill’s finalization, its reach would be felt by millions of Americans nationwide. If it does pass, tens of thousands of affected individuals and families will likely notice a significant change in their taxes come filing season.