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Special Report: Tax Reform 2005
CCH Tax Scenarios
Scenario 1
Unmarried parent and one child under age 17, $20,000 in wages.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
20,000 |
20,000 |
Standard Deduction |
(7,300) |
|
Personal Exemptions |
(6,400) |
|
|
-------- |
-------- |
Taxable Income |
6,300 |
20,000 |
Regular Tax |
630 |
3,000 |
Nonrefundable Child Credit |
(630) |
|
Refundable Child Credit |
(370) |
|
Earned Income Credit |
(1,762) |
|
Family Credit |
|
(3,000) |
Work Credit |
|
(1,069) |
|
---------- |
-------- |
Refund |
(2,132) |
(1,069) |
Taxpayer would have a $1,063 smaller refund under the new proposal.
Decrease in refundable child credit |
($370) |
Difference in amount of earned income credit and work credit |
(693) |
|
----------- |
Decrease in refund |
($1,063) |
Scenario 2
Unmarried parent and one child under age 17, $32,000 in wages.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
32,000 |
32,000 |
Standard Deduction |
(7,300) |
|
Personal Exemptions |
(6,400) |
|
|
-------- |
-------- |
Taxable Income |
18,300 |
32,000 |
Regular Tax |
2,223 |
4,800 |
Nonrefundable Child Credit |
(1,000) |
|
Family Credit |
|
(4,300) |
|
-------- |
-------- |
Tax After Credits |
$1,223 |
$500 |
Taxpayer would have a $723 decrease in tax under the new proposal.
Tax savings due difference between standard deduction and exemptions and family credit |
$2,245 |
Tax increase due to repeal of child credit |
(1,000) |
Tax increase due to repeal of 10% tax bracket |
(522) |
|
-------- |
Tax savings under new plan |
$723 |
Scenario 3
Married couple with two children under age 17. Both taxpayers work and earn $50,000 in wages.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
50,000 |
50,000 |
Standard Deduction |
(10,000) |
|
Personal Exemptions |
(12,800) |
|
|
---------- |
-------- |
Taxable Income |
27,200 |
50,000 |
Regular Tax |
3,350 |
7,500 |
Nonrefundable Child Credit |
(2,000) |
|
Family Credit |
|
(6,300) |
|
-------- |
-------- |
Tax After Credits |
$1,350 |
$1,200 |
Taxpayer would have a $150 decrease in tax under the new proposal.
Tax savings due difference between standard deduction and exemptions and family credit |
$2,880 |
Tax increase due to repeal of child credit |
(2,000) |
Tax increase due to repeal of 10% tax bracket |
(730) |
|
------- |
Tax savings under new plan |
$150 |
Scenario 4
Married couple with two children under age 13. Both taxpayers work and earn $50,000 in wages. The couple incurs $6,000 in child care expenses.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
50,000 |
50,000 |
Standard Deduction |
(10,000) |
|
Personal Exemptions |
(12,800) |
|
|
-------- |
-------- |
Taxable Income |
27,200 |
50,000 |
Regular Tax |
3,350 |
7,500 |
Child care credit |
(1,200) |
|
Nonrefundable Child Credit |
(2,000) |
|
Family Credit |
|
(6,300) |
|
-------- |
-------- |
Tax After Credits |
$150 |
$1,200 |
Taxpayer would have a $1,050 increase in tax under the new proposal.
Tax savings due to difference between standard deduction and exemptions and family credit |
$2,880 |
Tax increase due to repeal of child care credit |
(1,200) |
Tax increase due to repeal of child credit |
(2,000) |
Tax increase due to repeal of 10% tax bracket |
(730) |
|
------- |
Tax increase under new plan |
($1,050) |
Scenario 5
Single individual with $50,000 in wages.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
50,000 |
50,000 |
Standard Deduction |
(5,000) |
|
Personal Exemptions |
(3,200) |
|
|
-------- |
-------- |
Taxable Income |
41,800 |
50,000 |
Regular Tax |
7,115 |
8,600 |
Family Credit |
|
(1,650) |
|
-------- |
-------- |
Tax After Credits |
$7,115 |
$6,950 |
Taxpayer would have a $165 decrease in tax under the new proposal.
Tax increase due to difference between standard deduction and exemptions and family credit |
($400) |
Tax savings due to increase in 15% bracket |
930 |
Tax increase due to repeal of 10% tax bracket |
(365) |
|
------- |
Tax savings under new plan |
$165 |
Scenario 6
Single individual with $50,000 in wages. Taxpayer also has $2,000 in charitable contributions.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
50,000 |
50,000 |
Standard Deduction |
(5,000) |
|
Personal Exemptions |
(3,200) |
|
|
----------- |
----------- |
Charitable contribution deduction |
|
(1,500) |
Taxable Income |
41,800 |
48,500 |
Regular Tax |
7,115 |
8,225 |
Family Credit |
|
(1,650) |
|
----------- |
----------- |
Tax After Credits |
$7,115 |
$6,575 |
Taxpayer would have a $540 decrease in tax under the new proposal.
Tax increase due to difference between standard deduction and exemptions and family credit. |
($400) |
Tax savings due to increase in 15% bracket |
930 |
Tax savings due to charitable contribution deduction |
375 |
Tax increase due to repeal of 10% tax bracket |
(365) |
|
-------- |
Tax savings under new plan |
$540 |
Scenario 7
Married couple with 2 children under the age of 17, $100,000 in income; $15,000 in itemized deductions including $9,000 in mortgage interest, all of which qualifies for the home credit, $4,500 in state and local taxes, $1,500 in charitable contributions.
|
2005 Present Law |
Reform Proposal |
|
|
|
Adjusted Gross Income |
100,000 |
100,000 |
Itemized Deductions |
(15,000) |
|
Personal Exemptions |
(12,800) |
|
|
-------- |
-------- |
Charitable contribution deduction |
|
(500) |
Taxable Income |
72,200 |
99,500 |
Regular Tax |
11,380 |
17,075 |
Child Credit |
(2,000) |
|
Home Credit |
|
(1,350) |
Family Credit |
|
(6,300) |
|
-------- |
-------- |
Tax After Credits |
$9,380 |
$9,425 |
Taxpayer would have a $45 increase in tax under the new proposal.
Tax increase due to difference between itemized dedunctions and exemptions and family credit |
($650) |
Tax savings due to charitable contribution deduction |
125 |
Tax savings due to home mortgage interest credit |
1,350 |
Tax increase due to repeal of child credit |
(2,000) |
Tax increase due to repeal of 10% tax bracket |
(730) |
Tax savings due to increase in 15% bracket |
1,860 |
|
------- |
Tax increase under new plan |
($45) |
Scenario 8
Married couple, with 2 children, $300,000 in income which includes $3,000 in dividend income and $10,000 in long term capital gains from the sale of stock. Taxpayer has $50,000 in itemized deductions, including $5,000 in charitable contributions, $15,000 in state and local taxes, $20,000 mortgage interest on principal residence, $8,000 mortgage interest on vacation home, and $2,000 interest on home equity loan.
|
2005 Present Law |
Reform Proposal |
|
|
|
Wages |
287,000 |
287,000 |
Dividends |
3,000 |
0 |
Long term capital gains |
10,000 |
2,500 |
|
----------- |
--------- |
Adjusted Gross Income |
300,000 |
289,500 |
Itemized Deductions |
(45,378) |
|
Personal Exemptions |
(4,352) |
|
|
----------- |
--------- |
Charitable contribution deduction |
|
(2,105) |
Taxable Income |
250,270 |
287,395 |
Regular Tax |
60,841 |
73,540 |
Addition due to AMT |
679 |
|
Home Credit |
|
(3,000) |
Family Credit |
|
(6,300) |
|
----------- |
--------- |
Tax After Credits |
$61,520 |
$64,240 |
Taxpayer would have a $2,720 increase in tax under the new proposal.
Tax savings due to dividends being exempt from taxation |
$450 |
Tax savings due to 75% capital gain exclusion |
675 |
Tax increase due to difference between itemized deductions and exemptions and family credit |
(10,111) |
Tax savings due to charitable contribution deduction |
695 |
Tax savings due to home mortgage interest credit |
3,000 |
Tax Savings due to repeal of alternative minimum tax |
679 |
Tax increase due to repeal of 10% tax bracket |
(730) |
Tax savings due to increase in 15% bracket |
1,860 |
Tax savings due to income taxed at 25% instead of 28% |
902 |
Tax increase due to income taxed at 30% instead of 28% |
(656) |
Tax savings due to income taxed at 30% instead of 33% |
516 |
|
---------- |
Tax increase under new plan |
($2,720) |
Scenario 9
Married couple, with 2 children, $300,000 in income which includes $3,000 in dividend income and $10,000 in long term capital gains from the sale of stock. Taxpayer has $50,000 in itemized deductions, including $5,000 in charitable contributions, $15,000 in state and local taxes, $20,000 mortgage interest on principal residence, $8,000 mortgage interest on vacation home, and $2,000 interest on home equity loan. Value of employer provided health insurance is $15,000.
|
2005 Present Law |
Reform Proposal |
|
|
|
Wages |
287,000 |
287,000 |
Dividends |
3,000 |
0 |
Long term capital gains |
10,000 |
2,500 |
Taxable employer provided health insurance |
|
3,500 |
|
------------ |
----------- |
Adjusted Gross Income |
300,000 |
293,000 |
Itemized Deductions |
(45,378) |
|
Personal Exemptions |
(4,352) |
|
|
----------- |
---------- |
Charitable contribution deduction |
|
(2,070) |
Taxable Income |
250,270 |
290,930 |
Regular Tax |
60,841 |
74,707 |
Addition due to AMT |
679 |
|
Home Credit |
|
(3,000) |
Family Credit |
|
(6,300) |
|
----------- |
----------- |
Tax After Credits |
$61,520 |
$65,407 |
Taxpayer would have a $3,887 increase in tax under the new proposal.
Tax increase due to taxability of health insurance coverage |
($1,155) |
Tax savings due to dividends being exempt from taxation |
450 |
Tax savings due to 75% capital gain exclusion |
675 |
Tax increase due to difference between itemized deductions and exemptions and family credit. |
(10,111) |
Tax savings due to charitable contribution deduction |
683 |
Tax savings due to home mortgage interest credit |
3,000 |
Tax savings due to repeal of alternative minimum tax |
679 |
Tax increase due to repeal of 10% tax bracket |
(730) |
Tax savings due to increase in 15% bracket |
1,860 |
Tax savings due to income taxed at 25% instead of 28% |
902 |
Tax increase due to income taxed at 30% instead of 28% |
(656) |
Tax savings due to income taxed at 30% instead of 33% |
516 |
|
----------- |
Tax increase under new plan |
($3,887) |
Scenario 10
Retired single taxpayer over age 65. Receives $14,000 of Social Security benefits and a pension of $20,000.
|
2005 Present Law |
Reform Proposal |
|
|
|
Pension Income |
20,000 |
20,000 |
Taxable Social Security Benefits |
1,000 |
6,000 |
|
-------- |
-------- |
Adjusted Gross Income |
21,000 |
26,000 |
Standard Deduction |
6,250 |
|
Personal Exemptions |
3,200 |
|
|
---------- |
---------- |
Taxable Income |
11,550 |
26,000 |
Regular Tax |
1,368 |
3,900 |
Family Credit |
|
(1,650) |
|
-------- |
-------- |
Tax After Credits |
$1,368 |
$2,250 |
Taxpayer would have an $882 increase in tax under the new proposal.
Tax savings due to difference between standard deduction, and exemption and family credit |
$233 |
Tax increase due to increase in amount of taxable social security |
(750) |
Tax increase due to repeal of 10% tax bracket |
(365) |
|
--------- |
Tax increase under new plan |
($882) |
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