President-elect Donald Trump’s proposed tax plan will affect just about every U.S. household, more or less.
One aspect of Trump’s plan that is getting a lot of attention these days is the proposal to modify the standard deductions and personal exemptions with which every middle-income American family has become quite familiar when figuring their income tax obligations.
One major part of Trump’s tax plan would more than double the standard deduction amount to $15,000 for single filers or $30,000 for married couples filing a joint return. At first, this seems huge when compared to the current $6,200 and $12,600 standard deductions available to single filers and married couples.
But don’t go celebrating just yet. Trump also proposes getting rid of the personal exemption, which currently decreases taxable income by $4,050 for each taxpayer, in addition to $4,050 each for a spouse and any dependents claimed on a household’s return. For example, a married with one child would get a $12,150 personal exemption on their 2016 tax return.
For most people, this modification will work to their advantage.
However, some U.S. households may stand to lose money in Trump’s tax plan, if it is approved by Congress. Those groups that may lose tax breaks include larger households, single parents and taxpayers whose elderly parents reside with them.
Large families hose personal exemptions are more than Trump’s proposed increase in the standard deduction could see their deduction go down. Generally, Trump’s standard deduction and personal exemption plan is potentially unfavorable for married couples with more than two dependents and for single taxpayers with more than one dependent
Trump’s plan also carriers an expanded deduction for child care expenses, which could help offset the loss in personal exemptions for many large families with younger children.
However, there could be no more head-of-household filing status if Trump’s plan is approved. The president-elect is proposing to eliminate the head-of-household filing status, which is used by more than 22 million taxpayers, according to the most recent data available.
The head-of-household status allows single taxpayers who have one or more dependents to add $3,000 to their standard deduction. This tax filing status is often used by single parents and taxpayers whose elderly parents reside with them.
For millions of taxpayers, eliminating the head-of-household status would worsen the impact of losing the personal exemption.
“His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households,” the Tax Policy Center writes in an critical overview of Trump’s revised tax plan.