TAX BILL

The tax bill being debated in the Senate this week would affect nearly every American.

Numerous analyses have estimated the average impact of the bill on household finances, and advocates on both sides have produced examples of “typical” families that would win or lose under the plan.

Such analyses, however, tend to gloss over the remarkable diversity of Americans’ financial situations. In truth, there is no “typical” American household. Even families that look similar on the surface can differ in ways that radically alter their situation come tax season.

If you want to understand the tax bill, it helps to understand what factors separate those families, and all the other families in between.

Take these findings with a grain of salt: The tax bill remains a work in progress, and some details aren’t yet clear.

This analysis doesn’t try to account for the effect the bill would have on the economy, for good or ill. Nor does it account for any spending cuts that Congress might adopt now or in the future to pay for these tax cuts. But it should give us a sense of how the bill’s many provisions would help — and hurt — millions of families across the country.

The U.S. tax code is full of specialized deductions — for charitable donations, mortgage interest, medical expenses and lots more. But about three-quarters of middle-class taxpayers don’t have to worry about any of that — they take the standard deduction, which replaces most of those specialized tax breaks with a single lump sum.

The Senate bill would roughly double the standard deduction: to $12,000 for an individual or $24,000 for married couples. As a result, most middle-class households that take the standard deduction now would get a tax cut under the bill in 2018, and almost none would get a tax increase.

The story is very different for the roughly one-quarter of middle-class families that itemize deductions. The Senate bill would eliminate some popular tax breaks, including deductions for state and local taxes. As a result, households that take those deductions now could lose out. In total, about 40 percent of households that itemize their deductions would pay more in 2018 under the Senate bill — in some cases a lot more.

For families with children, another big provision comes into play: the child tax credit.

The Senate bill would double that credit to $2,000 per child.

As a result, families with children would generally get a bigger tax cut, although the benefits start to phase out above a certain income. (This analysis is based on an interpretation of the tax bill that is being used by the Joint Committee on Taxation and many other economists. The bill is ambiguous, however, and there is an alternative interpretation that would be much less generous to lower-income parents.) One of the bill’s most significant changes would be the elimination of the deduction for state and local taxes. More than 40 million households wrote off a combined $350 billion in state and local income and sales taxes in 2015, according to the IRS, and 38 million households deducted close to $200 billion in property taxes.

Both deductions would disappear under the Senate bill.

(The House version of the bill would get rid of the deduction for income and sales taxes but would cap — not eliminate — the property-tax deduction.) The situation would look very different a decade from now. That’s because in order to reduce the cost of the bill, its authors set essentially all of the individual tax cuts — the doubled standard deduction, the more generous child credit, the lower tax rates — to expire after 2025.

But one provision that’s bad for taxpayers — changing the measure of inflation used for many tax calculations — would not expire. As a result, two thirds of middle-class households would get a tax increase in 2027, and none — zero percent — would get a tax cut.