The plan drops the number of tax brackets from seven to four. Individuals with taxable income up to $200,000 will have the first $45,000 taxed at 12 percent and the remainder at 25 percent. Married filers with taxable income up to $260,000 will have $90,000 of their income taxed at 12 percent and the rest at 25 percent.
Currently, individuals and married filers with taxable income at these levels are taxed at four rates ranging from 15 percent to 33 percent.
In keeping with the theme of simplification -- and to pay for some of the plan's revenue-losing provisions, such as a lower corporate tax rate -- the proposal aims to remove a lot of deductions and tax credits. It also eliminates the personal exemption. In return, individuals and married fillers would get a significant increase in the standard deduction.
The current standard deduction is $6,350 for a single filer, and the personal exemption is $4,050, for a total deduction of $10,400. For married filers, the current standard deduction is $12,700, and when combined with the personal exemption ($4,050 x 2), their total deduction is $20,800.
Under the GOP plan, the standard deduction nearly doubles to $12,200 for single filers and $24,400 for a married couple filing jointly. About 75 percent of filers now claim the standard deduction and don't itemize, so many could see some benefit from these changes.
However, the plan also aims to eliminate several deductions that many middle-income taxpayers can now claim. These are are commonly known as "above-the-line" deductions because you can claim even if you don't qualify to claim itemized deductions. The most commonly claimed itemized deductions are for state and local taxes, mortgage interest and charitable donations, the first two of which could also go away or be severely limited.
The four above-the-line deductions eliminated under the tax plan are:
Moving expenses: If you meet specific IRS criteria and have moving expenses relating to a change in job or business location, those expenses are currently deductible. In 2015 (the last year with available data), approximately 1.1 million taxpayers claimed this deduction, which saved them about $3.7 billion. But the GOP tax plan eliminates it.
Alimony: Nearly 600,000 taxpayers claimed a deduction for alimony paid to an ex-spouse, saving them nearly $12.3 billion. The Republican tax plan also ends this deduction.
Student loan interest: Single filers with income of up to $65,000, or joint filers with income of $130,000 or less, can now deduct interest of up to $2,500 annually on student loans. Considering that the aggregate student loan debt in the US is over $1 trillion and about 13.4 million Americans claimed this deduction, its loss would affect lots of people.
Tuition and fees: This special deduction currently allows taxpayers to deduct up to $4,000 of qualified education expenses. The income levels that allow full or partial deductibility of these expenses is the same as for the student loan interest deduction above. Eliminating this deduction could especially hit those getting training for new jobs.
The takeaway is that while most of middle-income Americans would see a tax cut from a few hundred to a few thousand dollars (depending on the amount of income), many others wouldn't see as much, and others would see some increase in taxes. But remember, under the current GOP plan, the lower tax rates would be in effect for just 10 years, so come 2027 all bets would be off.