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A Newly Approved Tax Plan To Boost Standard Deduction For Single And Joint Filers

A Newly Approved Tax Plan To Boost Standard Deduction For Single And Joint Filers (Photo: Yahoo Finance)

A bill passed by the House is said to temporarily up the standard tax deduction for single and joint filers in the coming two years.

A pictorial of a finance form, pen, and calculator (Photo: Investopedia)

Bill To Increase Standard Tax Deduction

The tax-writing House Ways and Means Committee has just approved the H.R. 3936, also known as the Tax Cuts for Working Families Act. The bill is said to boost the standard tax deduction temporarily for single and joint filers. Single filers would have $2,000 and $4,000 for married filers. The deduction for single filers would start out at $200,000 income and $400,000 for married filers. Rep. Carol Miller of Virginia stated that the bonus deduction is a tax cut amounting to $100,000 for working families.

According to the research conducted by the nonpartisan Penn Wharton Budget Model. Households of up to two-thirds would receive a tax cut next year under the bill. However, the tax deduction is not refundable and would not be able to reach low-income families or individuals. Researchers from the model concluded that only a small percentage within the low-income class would receive a tax cut under the bill. The standard deduction for singles and married this year is $13,850 and $27,700, respectively.

READ ALSO: The Reason Why Social Security Cost Of Living Adjustments (COLA) Would Be 2.7% Next Year

H.R 3936 to Help Ease Inflation?

Sponsors of the bill stated that it was meant to allow for relief from inflation, even if it was temporary. Inflation went up to 9.1% last June before dropping in May by around 4%. The Federal Reserve‘s target for inflation is 2%, which is similar to the historical average.

The American Enterprise Institute criticized this analysis by conducting its own. They pointed out that increasing what is considered “disposable income” for Americans would make inflation rates go up. This would also contradict what the Federal Reserve has been working on to slow down the spending of consumers by increasing the interest rates.

READ ALSO: Find Out Various Home Improvements That Are Tax Deductible This Year

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