MINNEAPOLIS (WCCO) — Your family’s budget could feel the impact of a historic tax cut early next year.
On Wednesday, President Donald Trump and Capitol Hill Republicans celebrated their $1.5 trillion tax overhaul at the White House.
The president is expected to sign the bill soon.
Analysts say the legislation cuts income tax brackets, saving the average taxpayer $1,600.
It roughly doubles the standard deduction for individuals and married couples.
But it only lets filers write off up to $10,000 in state and local taxes.
Certified financial planner Brian Vnak, with Wealth Enhancement Group, says “80 to 90 percent of households will likely end up receiving a refund.”
Vnak says the average couple will see their tax rates come down between three to four percent.
And for parents, the bill doubles the tax credit from $1,000 $2,000 per child.
Parents who send their children to private schools will specifically benefit.
The 529 plan, that typically only allows savings for college, will expand to include up to $10,000 a year toward elementary and high school education.
It’s true corporations will benefit with a tax cut, but so will small business owners and some self-employed people.
“Business owners have been given more generous benefits and a 20 percent deduction in pass through income that they didn’t have previously,” Vnak said.
So who loses?
Home owners in high tax states, like Minnesota. The reason is because taxpayers can only deduct $10,000 in state and local taxes from federal tax forms.
Currently, you can take unlimited deductions.
“For high income earners in this state, they’ve been getting that deduction, getting a benefit for it and they’re not going to have that anymore,” Vnak said.
He added that regardless of who comes out ahead, the country will likely see a huge shift in how people file taxes.
He said there could be as high as a 70 percent drop in people itemizing deductions instead favoring the standard deduction.
The tax bill changes won’t take effect until next year.