Here's what the Senate tax plan means for a family of four making $25,000, $75,000, or $175,000
- Senate Republicans will soon vote on their version of the Tax Cuts and Jobs Act.
- The Senate tax plan differs in significant ways from the version passed by the House.
- In the chart below, we ran the numbers to see how the Senate's tax plan could affect an American family of four with two kids under the age of 17.
Tax reform is starting to seem imminent.Senate and House tax plans contain significant differences. Before tax reform can become official, Republicans will have to agree on one plan.
We previously calculated how much a a family of four might save on taxes in 2018 if the House's current proposal became law. We've also explained how to use your 2016 tax return to estimate how your taxes might change next year if Trump's tax plan is signed into law.
In the chart below, we ran the numbers to see how the Senate's tax plan would affect an American family of four with two kids under the age of 17.
For families with a household income of $25,000 and $75,000, we assumed they would claim the standard deduction in both 2017 and 2018. According to the most recent IRS analysis of individual tax returns , 70.4% of taxpayers claimed the standard deduction on their tax return.
The Senate's bill would allow married taxpayers who file jointly and have two children to deduct $24,000 - less than the current combined $28,900 deduction, which includes the standard deduction and four personal exemptions. The House's bill proposes a standard deduction of $24,400.
For a family of four with a household income of $175,000, we assumed they would itemize deductions in 2017, and claim the standard deduction in 2018. Among those who itemize deductions, the average claimed was $27,053 in 2015. The most common itemized deductions and the total amount deducted by US taxpayers in 2015 were:
- Taxes paid, including state and local income taxes and sales tax: $539.8 billion.
- Interest paid, which primarily covers mortgage interest: $294.5 billion.
- Charitable contributions: $201.3 billion.
- Medical and dental expenses: $84.2 billion.
Tax savings for a family under Senate Republicans' tax planThe estimates in the chart show how tax reform might affect an American family of four if the Senate's tax plan becomes law:
- $25,000 household income: estimated annual tax savings of $100.
- $75,000 household income: estimated annual tax savings of $2,244.
- $175,000 household income: estimated annual tax savings of $3,095.
Tax savings for a family under House Republicans' tax plan
Our previous calculations using the House's tax plan showed that similar families would owe slightly more taxes than they would under the Senate's plan:
- $25,000 household income: estimated annual tax increase of $72.
- $75,000 household income: estimated annual tax savings of $1,711.
- $175,000 household income: estimated annual tax savings of $2,264.
Most Americans will see a slight increase in their take-home pay under the current proposals, but that could change in the future as many of the provisions are set to expire after 2025 . Some analysts have said that nearly half of Americans would see a tax increase at that time.
Trump's tax plan, if it passes, may free up some cash in the typical household's monthly budget. But the biggest winners are likely to be the wealthiest Americans who are poised to save significantly under the proposals.