Will the GOP Tax Plan Benefit the Middle Class? Will it Benefit You?

Are you middle class? Where you live and how much you make are significant factors. Along with geographic location and household income, a family’s ‘class’ can also be defined by net worth, education and occupation.

House Ways and Means Committee Chairman Kevin Brady | J. Scott Applewhite/AP

The definition of middle class has been a hot topic of discussion recently because as the GOP makes a push to overhaul the tax code, a major selling point is that their plan will significantly benefit the hard to define ‘middle class.’ Earlier today House Republican leadership unveiled that tax plan. It would make sweeping changes to corporate and individual taxes.

GOP Tax Highlights

  • Limits the deduction of mortgage interest for newly purchased homes up to $500,000
  • Retains 401(k) savings plans
  • Allows people to write off the cost of state and local property taxes up to $10,000
  • Eliminates a $7,500 federal electric-vehicle tax credit (sorry would be Tesla owners)
  • Slashes the corporate tax rate to 20% and create three new individual tax brackets of 12%, 25%, and 35%
  • Maintains a 39.6% rate on top earners and boosts the child tax credit to $1,600
  • Doubles the exemption for the estate tax and repeals it after six years

If you’re unsure of your class status – and if the proposed changes will benefit your household – you’re not alone. Perhaps the first step is understanding if you’re really in the middle class. The Washington Post created a calculator to help you figure that out. If you enter your household income and county, the calculator tells you whether you fall below, in or above the middle class in your county and of households nationally.

It defines middle class as “American households with incomes that fall between the 30th percentile mark and the 80th percentile mark.”

Final Thoughts

We’re a long way from the House Republican’s plan becoming law and there are likely to be changes, perhaps significant, along the way. Will the final product be a benefit to the middle class? Will it be a benefit to you? Only time will tell.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

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