What households need to know about the tax bill’s impact

Federal taxes can be confounding in any typical year. But the Republican-led Congress’ mad dash to approve the most sweeping tax overhaul in three decades has left many households unsure of what changes might await them come Jan. 1 and what they should do — if anything — before or after then.

Here are some things to know.

RATE CHANGE

For individuals, the legislation generally lowers rates across income levels. It retains the number of tax brackets — seven — but changes the rates that apply to particular income levels. For a couple filing jointly, the brackets will be 10 percent for taxable income up to $19,050, 12 percent on $19,050 up to $77,400, 22 percent on income to $165,000, 24 percent up to $315,000, 32 percent to $400,000, 35 percent to $600,000 and 37 percent on income above $600,000.

These rates don’t include the effects of deductions, which could change someone’s marginal tax rate. The marginal rate is the highest rate that applies to a taxpayer’s income. But under the bill, the individual tax rate cuts aren’t permanent; they’re set to expire in 2026.

Taxpayers, on average, would receive a $1,600 tax cut in 2018, according to an analysis by the Tax Policy Center, though about 5 percent of households would pay more. The policy center says middle-income households would receive a tax cut of about $900 while the top 1 percent would get a tax cut of about $50,000.

By 2027, after most individual income tax provisions expire, more than half of taxpayers would pay more tax than under current law.

One potential way to take advantage of next year’s lower tax rate would be to defer income, if possible, from 2017 into 2018. An employee could, for example, ask her employer to defer an annual bonus until next year. Or freelancers or business owners could delay submitting invoices until 2018, so that the eventual payment would become part of next year’s income and be subject to a lower tax rate.

STANDARD DEDUCTION

The bulk of Americans don’t itemize their tax deductions. They instead benefit from claiming the standard deduction. Under the bill, the standard deduction will roughly double to $12,000 for individuals and $24,000 for couples. As a result, a greater share of these taxpayers’ income will be shielded from tax. And because of the new cap on itemizing state and local tax deductions, households that previously itemized may now fare better by taking the standard deduction. (The increased standard deduction is also scheduled to expire in 2026.)

Taxpayers who have itemized their deductions but will likely take the standard deduction next year might consider making full use of their deductions during 2017. This could include making charitable contributions or paying for unreimbursed business expenses before year’s end.

But if a household’s deductions — for charitable giving, mortgage interest, state and local taxes of up to $10,000 and other items — exceed $12,000 (or $24,000 for a couple), it can still itemize and claim the higher amount.

Yet the bill doesn’t just provide new benefits; it also takes away some. An example is the personal exemption. A taxpayer can now deduct from his income a $4,050 exemption for himself, his spouse and each dependent. So while the standard deduction is doubling, that benefit could be offset for families by the elimination of the personal exemptions.

CHILD TAX CREDIT

The child tax credit, which helps parents offset the cost of raising children, will double from $1,000 per child to $2,000. The bill also makes up to $1,400 of the credit refundable. This means you can claim that portion of the credit even if your income if too low for you to owe tax.

This is a credit, so it’s particularly valuable because it directly reduces your tax bill — not just your taxable income. Taxpayers don’t have to itemize to receive it. The credit will begin to phase out once a household’s adjusted gross income hits $200,000 for individuals, or $400,000 for couples.

Still, because of how it’s written and because of other tax changes, the increased child credit won’t provide much help for low- and middle-income families. About 10 million children in the lowestincome working families would receive a token increase of $75 at best, if any at all, according to the Center on Budget and Policy Priorities. That’s because the size of the credit depends on a taxpayer’s income; lower-income workers don’t earn enough to receive much of a credit. And about 1 million children will be denied the credit because they lack a Social Security number, another new addition to tax law under the bill.

On top of that, the child tax credit also expires in 2026.