Potential federal tax change.

[Gumby]

H.R. 3696 -- A bill to increase the standard deduction by $2000 for single filers, $3000 for head of household and $4000 for married filing jointly for tax years 2024 and 2025 -- has been reported out of the House Ways & Means Committee. Income limits to take the increased deduction would be $200k, $300k and $400k, respectively.

https://www.congress.gov/bill/118th-congress/house-bill/3936/text?s=1&r=3

 

[MissMolly]

Woo hoo!

 

[ShokWaveRider]

What services do you think they want to cut to pay for it? Hopefully we do not need whatever they are.

 

[FlaMariner]

The higher standard deductions have made tax prep so much more sane vs the old way of itemized deductions and running around with receipts.

Just keep tweaking that and we are all much better for it......

 

[SecondCor521]

What services do you think they want to cut to pay for it? Hopefully we do not need whatever they are.

None, apparently. If you look at the CBO estimate, the bill will increase the national deficit by about $96 billion.

Cite: https://www.cbo.gov/publication/59343 table 1 last row.

 

[ERD50]

H.R. 3696 ... has been reported out of the House Ways & Means Committee. ...

Any sense of the chances of passing through Congress?

-ERD50

 

[ShokWaveRider]

None, apparently. If you look at the CBO estimate, the bill will increase the national deficit by about $96 billion.

Cite: https://www.cbo.gov/publication/59343 table 1 last row.

And that is a good thing?

 

[aaronc879]

It only helps the middle class, not the lower income people. It will increase inflation hurting the lower income people even more. If you are in the 10 or 12% bracket the benefit is minimal and if you are in the 22% or higher bracket then you shouldn't really need the extra money. I don't see an upside.

 

[ShokWaveRider]

It only helps the middle class, not the lower income people. It will increase inflation hurting the lower income people even more. If you are in the 10 or 12% bracket the benefit is minimal and if you are in the 22% or higher bracket then you shouldn't really need the extra money. I don't see an upside.

Exactly!

 

[SecondCor521]

And that is a good thing?

I didn't opine either way.

 

[Gumby]

It only helps the middle class, not the lower income people. It will increase inflation hurting the lower income people even more. If you are in the 10 or 12% bracket the benefit is minimal and if you are in the 22% or higher bracket then you shouldn't really need the extra money. I don't see an upside.

Using this year's brackets, suppose you are MFJ and currently have taxable income of $75k. Your federal taxes will be .012 x (75000-22000) + .10 x (22000 - 0) = $5920. This provision would reduce them to $5440 = 5920 - (4000 x .12) That's a benefit of $480, which is an 8.1% reduction in taxes paid (480/5920).

Now suppose you were MFJ with taxable income of $150k. Your federal taxes as of now would be .22 x (150000 - 89450) + .12 x (89450 - 22000) + .10 x (22000 - 0) = $20,975. This new law would reduce them by 0.22 x 4000 = $880 to $20,095, which is a reduction in taxes of only 4.2% (880/20975)

So I think it is wrong to say this benefits only higher income people. In fact, it disproportionately aids lower income people.

 

[Bigdawg]

Using this years brackets, suppose you are MFJ and currently have taxable income of $75k. Your federal taxes will be .012 x (75000-22000) + .10 x (22000 - 0) = $5920. This provision would reduce them to $5440 = 5920 - (4000 x .12) That's a benefit of $480, which is an 8.1% reduction in taxes paid (480/5920).

Now suppose you were MFJ with taxable income of $150k. Your federal taxes as of now would be .22 x (150000 - 89450) + .12 x (89450 - 22000) + .10 x (22000 - 0) = $20,975. This new law would reduce them by 0.22 x 4000 = $880 to $20,095, which is a reduction in taxes of only 4.2% (880/20975)

So I think it is wrong to say this benefits only higher income people. In fact, it disproportionately aids lower income people.

Math is hard!

 

[aaronc879]

Math is hard!

Apparently so since some people think $880 is less of a benefit than $480....

 

[lemming]

Itemized deductions were put there to encourage home ownership a nd charitable deduction and mitigate the effects of 'double payment of taxes to both state and federal. If they had wanted to make health care more affordable to us they could have taken out the requirement to only be above a percentage of income 7.5% now.

 

[ownyourfuture]

Using this years brackets, suppose you are MFJ and currently have taxable income of $75k. Your federal taxes will be .012 x (75000-22000) + .10 x (22000 - 0) = $5920. This provision would reduce them to $5440 = 5920 - (4000 x .12) That's a benefit of $480, which is an 8.1% reduction in taxes paid (480/5920).

Now suppose you were MFJ with taxable income of $150k. Your federal taxes as of now would be .22 x (150000 - 89450) + .12 x (89450 - 22000) + .10 x (22000 - 0) = $20,975. This new law would reduce them by 0.22 x 4000 = $880 to $20,095, which is a reduction in taxes of only 4.2% (880/20975)

So I think it is wrong to say this benefits only higher income people. In fact, it disproportionately aids lower income people.

Thanks for taking the time to break it down

 

[Gumby]

Apparently so since some people think $880 is less of a benefit than $480....

Proportionately, it is.

 

[pb4uski]

Why bother? The benefit for a MFJ couple with $80k of ordinary income the tax benefit is $580... big deal.

With the significant federal deficits that we have and large national debt this is the last thing that we should be doing... just a waste of time to try to curry favor with voters but a proverbial nit in the whole scheme of things.

 

[Bigdawg]

Apparently so since some people think $880 is less of a benefit than $480....

No one said it was/is. % matter.

 

[Bigdawg]

Why bother? The benefit for a MFJ couple with $80k of ordinary income the tax benefit is $580... big deal.

With the significant federal deficits that we have and large national debt this is the last thing that we should be doing... just a waste of time to try to curry favor with voters but a proverbial nit in the whole scheme of things.

^This. Concur.

 

[jebmke]

The higher standard deductions have made tax prep so much more sane vs the old way of itemized deductions and running around with receipts.

Just keep tweaking that and we are all much better for it......

Getting rid of Schedule A entirely would be a good move.

 

[aaronc879]

Getting rid of Schedule A entirely would be a good move.

Yes, it would be a good start. Hopefully it would be followed by eliminating most deductions and credits. Self employed people could still deduct their business expenses but that would be about it.

 

[street]

Thanks, Gumby for this information and the example.

 

[dmpi]

Only benefits those who actually pay taxes, and of those only ones the claim the standard deduction. Its probably going play into the potential repeal of the SALT deduction cap making it less useful. IMHO The tax code is already so darn complex, quit messing with it so I can plan better.

 

[HarveyS]

“Only”. From google and USA Today: “In the tax year 2020, 87.3% of Americans took the standard deduction, just shy of the 87.6% who did in 2019, IRS data shows.”

 

[Midpack]

Why bother? The benefit for a MFJ couple with $80k of ordinary income the tax benefit is $580... big deal.

With the significant federal deficits that we have and large national debt this is the last thing that we should be doing... just a waste of time to try to curry favor with voters but a proverbial nit in the whole scheme of things.

^This. Concur.

+2. Politics, the art of bribing us with our money. And we never stop falling for it, we encourage it…

What services do you think they want to cut to pay for it? Hopefully we do not need whatever they are.

You’re joking I assume.