Tax Code 101: What the House tax bill would mean for Michiana families
SOUTH BEND, Ind. --- House Republicans celebrating a tax victory, after the latest GOP tax bill was passed on Thursday.
It’s a nearly $1.5 trillion tax bill that, according to ABC News, would slash tax rates on corporations and private businesses, overhaul the individual tax code, and much more.
But, what does this all mean for families in Michiana?
Ryan Fair, a tax advisor with Korhorn Financial Group in Granger, gave ABC 57 a Tax Code 101 lesson.
For this lesson, he is using a family of four and the median household incomes for the following:
1. St. Joseph County -- $46,552
2. Elkhart County -- $47,913
3. Berrien County -- $44,993
“Family of four that’s making forty seven thousand dollars,” Fair said. “It’s pretty easy to not pay any income tax.”
First, he subtracts the new House GOP tax bill’s standard deduction amount, which is $24,000 for married couples and $12,000 for singles. Fair said that amount has double under the new House GOP bill from the current tax code.
“Seventy percent of Americans use standard deductions because that’s larger than itemized deductions,” he said.
After subtracting the standard deduction for each county, that left Fair with the following:
1. St. Joseph County -- $23,000
2. Elkhart County -- $24,000
3. Berrien County -- $21,000
“That’s your taxable income,” he said. “So that’s where you then go look at the tax brackets and see what tax bracket this family’s in.”
According to the House GOP’s tax bill, families making the median household income are in the 12th percentile. One of the four new tax brackets a part of the bill – 12 percent, 25 percent, 35 percent, and 39.6 percent.
“The good thing about those four tax brackets is that they’re all lower than they currently are,” Fair said.
He added that these new brackets allow people to move up a bracket, and in turn, pay less in federal taxes.
After finding which tax bracket families in each county were in, Fair multiplied that percentage by their taxable incomes to get their federal income tax amount.
1. St. Joseph County -- $23,000 x .12 = $2,760
2. Elkhart County -- $24,000 x .12 = $2,880
3. Berrien County -- $21,000 x .12 = $2,520
At this point, Fair used those amounts and applied the child and family tax credit. For the child tax credit, he said parents can take out $1,600 for each child in their household.
“That’s literally an extra sixteen hundred dollars in your pocket,” Fair said. “It’s not just a deduction from taxable income but it’s a credit.”
And another $300 family tax credit for everyone else in the home. He said these credits make up for the removal of other items like state and local tax exemptions.
The credits, tax brackets, and standard deductions that leaves Michiana families, according to Fair, in St. Joseph, Elkhart, and Berrien counties with virtually no federal taxes to pay.
1. St. Joseph County -- $2,760 - $3,200 - $600 = -$1,040
2. Elkhart County -- $2,880 - $3,200 - $600 = -$920
3. Berrien County -- $2,520 - $3,200 - $600 = -$1,280
“The average Michiana resident is going to see they’re going to see savings due to the lower tax brackets the higher standard deductions that’s going to help everybody in our area,” he said.