The GOP is attempting to pass its massive overhaul of the tax system, and it would slash an enormous amount of taxes for the wealthy and corporate classes, while in some cases raising taxes on the lower and middle classes. It's a controversial and markedly unpopular bill, according to the polls, but that doesn't seem to be slowing its momentum. So, you might be wondering as it gets closer and close to becoming law: how will taxes change in 2018? What preparations, if any, do you need to be making right now?
The simple, essential thing to keep in mind is that you won't notice any changes right away. In fact, it'll be more than a year before you notice any differences when filing your tax returns. That's because federal income taxes on earnings from a given year aren't filed until the following year, with a mid-April deadline.
In other words, the taxes you filed earlier this year were for your earnings from 2016. Similarly, the taxes you file sometime between January and April of 2018 will be for 2017, a full year in which the Republican tax plan was not in effect.
Once the calendar rolls around to 2019, however, then you'll be filing taxes on income earned under the new Republican rates, as well as with different deductions, provided it passes. Notably, one of the families that will benefit enormously from the bill's passage is the president's own ― according to Forbes, he could potentially save $11 million per year under the new rates.
It'll also take until 2019 for another major element of the bill to take effect, one with big implications for millions of Americans. The repeal of the Affordable Care Act's individual mandate is a tacked-on provision that's likely to have a huge impact on the U.S. health care system. Throughout the early months of 2017, and clear into September, the Republicans tried repeatedly to repeal the ACA and replace it with their own plan, one in which tens of millions of Americans were projected to lose their health insurance coverage.
There would also be some sweeping changes to the estate tax that would greatly benefit the uber-rich. At present, the estate tax ― also known as the inheritance tax, and often pejoratively referred to as the "death tax" by conservatives who oppose it ― only takes effect when an individual leaves behind an estate valued at more than $5.49 million. For married couples, the tax-free exemption swells to approximately $11 million.
The GOP's tax bill would double that tax-free threshold, bumping it up to approximately $11 million for individuals and $22 million for married couples. Under the current levels, the estate tax is still only paid by a very narrow, very wealthy handful of Americans; according to CNBC, less than 10,000 estates were taxed in 2017, but the return on those taxes was huge, amounting to nearly $20 billion. In the original version of the bill, the estate tax was outright abolished in 2024, but that provision did not make it to the final bill.
While the bill was initially expected to be voted on and passed by both the House and Senate on Tuesday, a snafu has reportedly scuttled that schedule. Due to a handful of elements in the bill the House passed on Tuesday being in violation of the Byrd Rule, it'll have to return to the House for a re-vote on Wednesday, after which it will be taken up by the Senate. Nonetheless, with erstwhile moderates like Sen. Susan Collins and Sen. Bob Corker publicly on board, it looks as if its passage is all but assured in the days to come.