Washington Wire: Effect of tax reform on personal tax rates and deductions
This massive overhaul of the tax code would affect credit union members in various ways by three major changes: reductions in tax rates, a doubling of the standard deduction, and elimination or curtailment of many itemized deductions and credits. The tax rate reductions for income levels of most credit union members would provide significant decreases in total tax bills. This legislation would also reduce the attractiveness of itemizing deductions for many credit union members. Some of the itemized deduction changes which would directly affect members’ use of credit unions, are discussed in more detail below.
The net income increases that most households will enjoy from this legislation, after a long period of real wage stagnation, would likely make a difference in many households’ spending plans. Some of that spending will likely involve increased consumer loan demand at credit unions.
The bill would sharply reduce itemized deductions by middle-income households. This is due both to the doubling of the standard deduction and elimination or reductions of deductions. According to the Tax Policy Institute, under current rules less than half of tax filers with annual incomes under $100,000 itemize, while the vast majority of those with higher incomes do so. If this tax legislation is enacted, fewer taxpayers with incomes below $100,000 would itemize, and many with incomes between $100,000 and $150,000 would likely find it no longer worthwhile. That encompasses the vast majority of credit union members. Read more on tax reform here.
Read the full Washington Wire here.