The GOP tax bill has passed through Congress, with Republican majorities in both houses carrying the tax reform package to President Donald Trump’s desk, where he has signed it into law. But the legislation that breezed through the House and squeezed through the Senate is complex, so it’s hard to know exactly when tax reform will effect taxpayers across the U.S.
Some of the Republican tax bill’s impact will begin at the start of 2018, though other elements won’t take effect until 2019 and beyond. For instance, when you file your 2017 taxes in April, you’ll already be getting some benefits like lower tax withholding, but other perks won’t show until you file your tax return in April 2019.
If you’re trying to get your finances ready to take advantage of the Trump tax plan, here’s what you need to know:
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Tax brackets change on January 1
With changes to the tax rates, the GOP tax bill brings tax cuts to almost all of the seven tax brackets beginning in 2018. That means the current rates, from 10% for the lowest bracket to 39.6% for the highest earners, will change and look like this:
Tax withholding changes early in 2018
According to the Internal Revenue Service, new guidance about tax withholding will be issued in January, which means the amount of taxes that come out of your paycheck could change as early as February.
Standard deduction increases will take a while
For the 2017 tax year, the standard deduction for single taxpayers is $6,350. In other words, you won’t get to use the newly passed $12,000 standard deduction when you file your 2017 taxes in April 2018. Likewise, married couples filing jointly will see a bump from $12,700 to $24,000, but that won’t impact their household finances until they file in April 2019. So, don’t start budgeting around that big tax return, yet.
Obamacare isn’t going away, yet
Donald Trump and the Republican Party fought all year to repeal and replace the Affordable Care Act (ACA). And though their healthcare push fell short, they were able to insert language into the GOP tax bill to eliminate the ACA’s individual mandate, the clause that financially penalized taxpayers if they did not sign up for health insurance. However, the individual mandate doesn’t end until 2019, so don’t go dumping your healthcare yet.
At more than 560 pages, the GOP tax reform bill has a lot more intricacies, and there are undoubtedly many more ways to plan ahead for your taxes. But these five pieces will help the majority of households prepare for the big changes ahead.