Who are the big (tax) winners ahead of the 2018 filing year?
US Government wins
The majority of individuals filing US tax returns will pay more tax after the Tax Reform. The tax increase will affect US citizens, green card holders, as well as non-resident aliens with income from US sources. However, certain categories of individual taxpayers will see a reduction in tax.
And the winners are…
Very low-income taxpayers come out on top
- Married couple
- No children
- Combined income of $43K.
In 2017, the couple would have paid $2,400 tax on this income. In 2018, they will pay zero tax.
Before the reform, a 10% tax was assessed on taxable income from the first dollar. Under the new rules, the 10% bracket was eliminated. The 12% tax bracket starts from taxable income of $19,050. As a result, this couple will pay no federal tax at all. After the standard deduction of $24K, their taxable income will be $19K, which is below the lowest tax bracket.
If they have children they will receive $2K credit per child instead of $1K they would have received before the reform and they are eligible for the Earned Income Credit (EIC) on top of that.
Whole Story at TFX.