The three most significant changes:
- Tax bracket details: The most significant to me and most households is that the 12% tax bracket extends farther than the 15% tax bracket in current code. Specifically, under current law, the 15% bracket ends at around $76,000 for married filing jointly, whereas the Republican proposal would have a 12% rate up to $90,000 for married filing jointly. In my previous calculation, I assumed 12% rate ended at same income level as current 15% rate. This extended bracket saves me about $1,800 in taxes compared to my initial calculations. The proposal also retains the 39.6% rate for incomes over a million dollars but that doesn't affect my family.
- Property Taxes deductible up to $10,000: This is a compromise on the state and local tax deduction controversy. For my household, it wouldn't matter. It would bring our potential tax deductions from about $18,000 to just under $24,000, the new standard deduction, so we still wouldn't itemize. However, this could help reduce the hit on some California households.
- Future mortgage interest deduction capped at a $500,000 mortgage, reduced from current cap of $1 million. This could have interesting effects on California housing, especially in high-cost coastal areas. In some ways, you could think of this as paying for the return of the property tax deduction. If you are buying a Bay Area house with a jumbo mortgage, you will still get to deduct property taxes under this new proposal but that will be offset by this new limit on your ability to deduct mortgage interest.
So people like me are still facing an unpleasant tax increase from the Republican/Trump plan, even if it is not quite as large as I originally thought.