CNN
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Many taxpayers could see even more money in their pockets in coming years under a sweeping tax and spending cuts package that House Republicans hope to finalize before Memorial Day.
The tax portion of the legislation, which the House Ways and Means Committee approved on Wednesday, makes permanent essentially all of the individual income tax breaks in the GOP’s 2017 Tax Cuts and Jobs Act, which were set to expire after this year. Those measures may not be as noticeable to taxpayers since they currently enjoy those benefits and may not realize they could be facing a tax hike next year if the provisions are allowed to lapse.
The proposal also provides some temporary tax relief for certain individuals, such as parents, senior citizens and tipped workers.
Most taxpayers, aside from those with the lowest incomes, would see their average federal income tax rate decrease over the next decade, according to the Joint Committee on Taxation.
For instance, households earning between $60,000 and $80,000 a year would see their average tax rate fall to 11.4% in 2027 under the proposal, compared to 13.1% under current law. For those earning more than $1 million, their rate would be 28.3%, compared to 31.1%.
But those earning less than $15,000 would see an increase to 4.8%, compared to 4%, likely in large part because of the expiration of the Affordable Care Act’s enhanced premium subsidies.
The package’s tax provisions could still change before they are voted on by the full House, and the Senate could make more revisions.
Also, the legislation contains many other measures that could negatively affect certain Americans’ finances, including cuts to spending on Medicaid and food stamps, the elimination of consumer tax credits for electric vehicles and energy efficient appliances and the restructuring of the federal student loan program.
Here are some of the folks who would be helped by the additional proposed tax breaks:
Parents would get a larger child tax credit from 2025 through 2028. The credit would jump to $2,500 per child, up from the current $2,000, for single parents earning up to $200,000 and married couples earning up to $400,000, after which the credit phases out. But fewer families could claim it – parents would now have to have Social Security numbers, in addition to the children.
Lower and middle-income older Americans would receive a $4,000 increase to their standard deduction from 2025 through 2028. But the benefit would start to phase out for individuals with incomes of more than $75,000 and couples with incomes double that amount. The provision is in lieu of President Donald Trump’s campaign promise to eliminate taxes on Social Security benefits.
Certain taxpayers would be able to deduct the income they receive from tips on their tax returns, fulfilling a key Trump campaign promise. But it would only apply to occupations that traditionally receive tips and only be in effect from 2025 through 2028. Those considered highly compensated, who make more than $160,000 in 2025, would not qualify.
Many hourly workers would not have to pay federal income tax on the overtime compensation they receive for the next four years. It also applies to those who are not considered highly compensated. This provision was one of Trump’s campaign promises.
Many taxpayers with auto loans would be able to deduct up to $10,000 in interest annually from 2025 through 2028. But the tax break would start to phase out for single filers earning more than $100,000 and married couples earning $200,000. The provision, which is another of Trump’s campaign promises, applies to owners of passenger vehicles that had their final assembly in the US.
