Personal Finance

Here's What the 2018 Tax Brackets Will Be If the GOP Tax Bill Passes

Black notebook with tax reform written in yellow letters on the cover.

Over the past few months, the GOP's tax reform efforts have evolved at a rapid pace. The House of Representatives' version of the Tax Cuts and Jobs Act called for a reduction to just four tax brackets, while the Senate kept the number of brackets at seven and lowered most marginal tax rates.

We finally know what the joint version of the tax reform bill will look like, and while it makes a number of changes to the tax code, here's a rundown of what the individual tax brackets look like.

Black notebook with tax reform written in yellow letters on the cover.

Image source: Getty Images.

The proposed 2018 tax brackets

Marginal Tax Rate Single Married Filing Jointly Head of Household Married Filing Separately
10% $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525
12% $9,525-$38,700 $19,050-$77,400 $13,600-$51,800 $9,525-$38,700
22% $38,700-$82,500 $77,400-$165,000 $51,800-$82,500 $38,700-$82,500
24% $82,500-$157,500 $165,000-$315,000 $82,500-$157,500 $82,500-$157,500
32% $157,500-$200,000 $315,000-$400,000 $157,500-$200,000 $157,500-$200,000
35% $200,000-$500,000 $400,000-$600,000 $200,000-$500,000 $200,000-$300,000
37% Over $500,000 Over $600,000 Over $500,000 Over $600,000

Data source: Joint Explanatory Statement of the Committee of Conference.

For comparison, here are the 2018 tax brackets that are set to take effect under our current tax law:

Marginal Tax Rate Single Married Filing Jointly Head of Household Married Filing Separately
10% $0-$9,525 $0-$19,050 $0-$13,600 $0-$9,525
15% $9,525-$38,700 $19,050-$77,400 $13,600-$51,850 $9,525-$38,700
25% $38,700-$93,700 $77,400-$156,150 $51,850-$133,850 $38,700-$78,075
28% $93,700-$195,450 $156,150-$237,950 $133,850-$216,700 $78,075-$118,975
33% $195,450-$424,950 $237,950-$424,950 $216,700-$424,950 $118,975-$212,475
35% $424,950-$426,700 $424,950-$480,050 $424,950-$453,350 $212,475-$240,025
39.6% Over $426,700 Over $480,050 Over $453,350 Over $240,025

Data source: IRS.

A few important things to notice

First, notice that the lowest two tax brackets use income ranges that are almost identical to the current-law brackets, just with a lower rate of 12% for the second bracket. Since the median American household is currently in the 15% tax bracket, this should have the desired effect of lower taxes for middle-income households.

Furthermore, notice that the final version of the bill eliminates the so-called marriage penalty , except for the highest earners. In other words, with the exception of the highest two tax brackets, the income thresholds for singles are exactly half of those for married couples. Eliminating the marriage penalty, especially for middle-income households, is one thing President Trump discussed in his campaign tax plan. And for most Americans, it looks like this will be the case.

Finally, while the head of household filing status won't be eliminated, as it was in President Trump's campaign tax plan, it would become less beneficial for higher-income filers. As you can see in the current tax brackets, all of the head of household income ranges are significantly higher than the corresponding ranges for singles. On the other hand, in the new proposal, aside from the lowest three brackets, the head of household income ranges are identical to those for singles.

Will you save money?

It's difficult to say whether the tax reform bill will save you money or not, just based on the proposed tax brackets. There are simply too many other changes that could affect you.

For example, the bill also calls for nearly doubling the standard deduction while eliminating the personal exemption. This could be a negative factor for certain households, especially those that currently itemize deductions.

However, it's fair to say that most Americans would see their tax bills go down if the final version of the tax reform bill is signed into law.

The $16,122 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: One easy trick could pay you as much as $16,122 more...each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies .

The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Personal Finance Videos

How Student Loan Refinancing Works

Though it may be a great way to lower monthly payments, not everyone understands the student loan refinancing process. NerdWallet explains it. For more, try our refinance calculator: http://bit.ly/nerdwallet-student-loan-refinancing-calculator

Nov 25, 2019

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More