Lower Tax Rates ...
Prior to this law going into effect there were seven tax brackets - although there was discussion about reducing this down to 3 or 4, those ideas were eventually struck down and the current structure of 7 brackets was maintained; HOWEVER most tax rates were reduced by 3 to 4 percent ... while these changes might not sound like a lot, if you have $40,000 of income at the lower 12% instead of 15% you'll pay $1,200 LESS in tax just from this change.
Wider tax Brackets ...
Our income tax system operates on a graduated tax scale - as you move through the tax brackets you pay a higher rate of tax on each successive income range. What wider tax brackets mean is that the amount of income to which each tax bracket applies has gotten larger. This means that you effectively will pay less total tax. It is especially beneficial to the highest income taxpayers, which is one of the reasons that you heard that this tax bill favors the wealthy.
Here is a comparison of the OLD versus the NEW brackets / rates for a Married Filing Joint couple...
We are on top of this new tax law here at LCI Taxes and are ready to help you and your family prepare for these changes as well as any other that may be forthcoming. Give us a call at 386-586-3976 with questions or to schedule your appointment!
Chris Kocher CPA