In December 2017, Congress passed and President Trump signed the Tax Cuts and Jobs Act (TCJA), a package of sweeping reforms to the U.S. tax code, both for individual filers and for corporations.
The TCJA cuts income tax rates for workers at every level and nearly doubles the standard deduction, shielding more income from taxation. It expands the Child Tax Credit and preserves other popular tax benefits like the deductions for mortgage interest and charitable deductions, among others.
Prior to the TCJA, American corporations faced the world’s highest statutory corporate income tax rate at 35 percent. The tax reform law lowers this rate to 21 percent, putting the U.S. rate much closer to the global average. Many small businesses known as “pass-through entities” (because income “passes through” to the owner and is taxed as personal income) will benefit from tax reform as well, as the law provides them with a 20-percent deduction on business profits. While the TCJA does not apply retroactively to 2017, the impact of the law has immediately become clear.
How exactly is the tax reform law helping American families, expanding work opportunities, and fostering strong economic growth? Read more to find out!