How the New Tax Bill Affects Middle-Income Families

The Impact of Tax Cuts

Under the new tax bill, families who aren’t receiving government assistance, such as food stamps, stand to gain. The key benefits include tax cuts, with specific revisions aimed at excluding certain overtime pay from taxation. Besides, location-dependent benefits will also be available to some middle-income families resulting from the increased limit on deducting state and local taxes from their federal taxable income.

Increasing Cap on SALT Deductions

Since 2017, SALT deductions had a cap of $10,000. However, the new bill proposes a rise in this ceiling to $40,000 for households earning below $500,000. This adjustment is a significant relief for families residing in high-tax states. Despite historical data indicating a more significant impact of the SALT cap on the wealthy, this adjustment will bring substantial benefits to middle-income families as well.

Charitable Contributions Tax Deduction

Another appealing feature of the new tax bill is the tax deduction that rewards charitable contributions. This provision is especially beneficial for those who do not itemize their returns, making it an attractive option for many middle-income families to consider.

Expected Tax Cuts for Middle-Income Households

For families within the middle of the income distribution range – those earning between $53,300 and $92,100 – an average tax cut of $1,510 is expected, as per an analysis by the Institute on Taxation and Economic Policy (ITEP).

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