Bill Summary
The "Working Families Tax Cut Act" proposes changes to the Internal Revenue Code of 1986, specifically by renaming the "standard deduction" to the "guaranteed deduction." This change reflects a rebranding of the deduction used by taxpayers to reduce their taxable income. Alongside this renaming, the bill introduces an additional "bonus guaranteed deduction" for the taxable years 2026 and 2027.
The bonus amounts are set at $4,000 for joint filers or surviving spouses, $3,000 for heads of household, and $2,000 for individual filers. These amounts will be adjusted for inflation in subsequent years. However, the bonus deduction will phase out for taxpayers with modified adjusted gross incomes above specified thresholds: $400,000 for joint filers, $300,000 for heads of household, and $200,000 for single filers.
The changes will apply to taxable years beginning after December 31, 2025, aiming to provide additional tax relief to working families during the specified period.
Possible Impacts
Here are three examples of how the "Working Families Tax Cut Act" could affect people:
1. **Increased Tax Deductions for Families**: The renaming of the "standard deduction" to "guaranteed deduction" may create a perception of greater financial support for taxpayers, particularly for families. The additional bonus guaranteed deduction of up to $4,000 for joint filers and $3,000 for heads of household could significantly reduce taxable income for these families, leading to lower tax bills. This could provide families with more disposable income to spend on essential goods and services, thereby boosting their overall financial stability.
2. **Income-Based Phase-Outs**: The legislation includes provisions that reduce the bonus guaranteed deduction for individuals with modified adjusted gross incomes above certain thresholds ($200,000 for single filers, $300,000 for heads of household, and $400,000 for joint filers). This means that higher-income earners may not benefit from the full bonus deduction, which could lead to a more equitable tax system by targeting relief towards middle- and lower-income families. However, it also creates a situation where families near these income thresholds may face a reduction in benefits, potentially affecting their financial planning and tax strategies.
3. **Inflation Adjustments**: The act includes provisions for the bonus guaranteed deduction to be adjusted for inflation starting in 2027. This means that as the cost of living increases, the value of the deduction will also increase, helping to maintain its purchasing power over time. This could benefit taxpayers by ensuring that their tax relief keeps pace with inflation, which is particularly important for families facing rising costs of living. However, if inflation significantly outpaces adjustments, some families may still feel financial strain despite the legislative changes.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1833 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 1833
To amend the Internal Revenue Code of 1986 to rename the standard
deduction the guaranteed deduction, and to add a bonus amount to the
guaranteed deduction for taxable years 2026 and 2027.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 4, 2025
Ms. Malliotakis introduced the following bill; which was referred to
the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to rename the standard
deduction the guaranteed deduction, and to add a bonus amount to the
guaranteed deduction for taxable years 2026 and 2027.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Working Families Tax Cut Act''.
SEC. 2. STANDARD DEDUCTION RENAMED GUARANTEED DEDUCTION.
(a) In General.--Section 63 of the Internal Revenue Code of 1986 is
amended--
(1) by striking ``standard deduction'' each place it
appears and inserting ``guaranteed deduction'', and
(2) in subsection (c)--
(A) in the heading, by striking ``Standard
Deduction'' and inserting ``Guaranteed Deduction'',
(B) in the heading of paragraph (2), by striking
``standard deduction'' and inserting ``guaranteed
deduction'',
(C) in the heading of paragraph (3), by striking
``standard deduction'' and inserting ``guaranteed
deduction'',
(D) in the heading of paragraph (5), by striking
``standard deduction'' and inserting ``guaranteed
deduction'',
(E) in the heading of paragraph (6), by striking
``standard deduction'' and inserting ``guaranteed
deduction'', and
(F) in the heading of paragraph (7)(A), by striking
``standard deduction'' and inserting ``guaranteed
deduction''.
(b) Conforming Amendments.--
(1) Section 1(g)(4)(A) of such Code is amended by striking
``standard deduction'' and inserting ``guaranteed deduction''.
(2) Section 56(b)(1)(D) of such Code is amended--
(A) in the heading, by striking ``Standard
deduction'' and inserting ``guaranteed deduction'', and
(B) by striking ``standard deduction'' and
inserting ``guaranteed deduction''.
(3) Section 861(b) of such Code is amended by striking
``standard deduction'' and inserting ``guaranteed deduction''.
(4) Section 862(b) of such Code is amended by striking
``standard deduction'' and inserting ``guaranteed deduction''.
(5) Section 1398(c) of such Code is amended--
(A) in the heading, by striking ``Standard
Deduction'' and inserting ``Guaranteed Deduction'',
(B) in the heading of paragraph (3), by striking
``standard deduction'' and inserting ``guaranteed
deduction'', and
(C) by striking ``standard deduction'' and
inserting ``guaranteed deduction''.
(6) Section 3402 of such Code is amended by striking
``standard deduction'' each place it appears and inserting
``guaranteed deduction''.
(7) Section 6012 of such Code is amended by striking
``standard deduction'' each place it appears and inserting
``guaranteed deduction''.
(8) Section 6013(b)(3)(A) of such Code is amended by
striking ``standard deduction'' and inserting ``guaranteed
deduction''.
(9) Section 6014(b)(4) of such Code is amended by striking
``standard deduction'' and inserting ``guaranteed deduction''.
(10) Section 6334 of such Code is amended by striking
``standard deduction'' each place it appears and inserting
``guaranteed deduction''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 3. BONUS GUARANTEED DEDUCTION FOR 2026 AND 2027.
(a) In General.--Section 63(c) of the Internal Revenue Code of 1986
(as amended by section 2) is amended by adding at the end the following
new paragraph:
``(8) Bonus guaranteed deduction for taxable years 2026 and
2027.--
``(A) In general.--In the case of a taxable year
beginning after December 31, 2025, and before January
1, 2028, the guaranteed deduction shall be increased by
the amount of the bonus guaranteed deduction.
``(B) Bonus guaranteed deduction.--For purposes of
this paragraph, the bonus guaranteed deduction is--
``(i) $4,000 in the case of a joint return
or a surviving spouse (as defined in section
2(a)),
``(ii) $3,000 in the case of a head of
household, and
``(iii) $2,000 in any other case.
``(C) Adjustment for inflation.--In the case of a
taxable year beginning after 2026, each dollar amount
in subparagraph (B) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `2025' for `2016' in
subparagraph (A)(ii) thereof.
If any increase under this subparagraph is not a
multiple of $50, such increase shall be rounded to the
next lowest multiple of $50.
``(D) Limitation on bonus guaranteed deduction
based on modified adjusted gross income.--
``(i) In general.--The bonus guaranteed
deduction determined under subparagraph (B)
shall be reduced (but not below zero) by 5
percent of so much of the taxpayer's modified
adjusted gross income as exceeds the threshold
amount. For purposes of the preceding sentence,
the term `modified adjusted gross income' means
adjusted gross income increased by any amount
excluded from gross income under section 911,
931, or 933.
``(ii) Threshold amount.--For purposes of
clause (i), the threshold amount is--
``(I) $400,000 in the case of a
joint return or a surviving spouse (as
defined in section 2(a)),
``(II) $300,000 in the case of a
head of household, and
``(III) $200,000 in any other
case.''.
(b) Effective Date.--The amendments made by this subsection shall
apply to taxable years beginning after December 31, 2025.
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