HR 1833119th CongressIn Committee

Working Families Tax Cut Act

Introduced: Mar 4, 2025

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Working Families Tax Cut Act primarily renames the standard deduction to a “guaranteed deduction” and preserves the existing deduction framework, while adding a temporary, enhanced bonus for 2026 and 2027. Specifically, it changes all references throughout the Internal Revenue Code from “standard deduction” to “guaranteed deduction.” It then creates a separate, one-time (for 2026-2027) bonus to that deduction: $4,000 for joint filers or surviving spouses, $3,000 for head of household, and $2,000 for all other filing statuses. This bonus is inflation-adjusted starting in 2027 and beyond, and it is reduced by 5% of the taxpayer’s modified adjusted gross income (MAGI) above certain thresholds. The act applies to taxable years beginning after December 31, 2025, and it also makes numerous conforming edits to other code sections to reflect the new name. In short, the bill keeps the standard deduction intact in real terms but renames it and adds a temporary, income-tested bonus for 2026-2027 that scales with filing status and is adjusted for inflation in later years.

Key Points

1Renaming only: The standard deduction is renamed to the guaranteed deduction across the Code, with all relevant headings and references updated accordingly (no stated change to the base deduction amount itself).
2Bonus guaranteed deduction for 2026-2027: For taxable years 2026 and 2027, the guaranteed deduction is increased by a bonus amount:
3- $4,000 for joint filers or surviving spouses
4- $3,000 for heads of household
5- $2,000 for all other taxpayers
6Inflation adjustment: Beginning in 2027, the bonus amounts (and the base counterparts) are adjusted for inflation using the standard cost-of-living adjustment method, with rounding rules (to the nearest $50 where applicable).
7MAGI-based phase-out: The bonus deduction is reduced (but not below zero) by 5% of the taxpayer’s MAGI above thresholds:
8- $400,000 for joint filers or surviving spouses
9- $300,000 for heads of household
10- $200,000 for all other filers
11Effective date and conforming edits: The changes apply to taxable years beginning after December 31, 2025. The bill also makes conforming amendments to numerous sections of the Code to replace references to “standard deduction” with “guaranteed deduction.”

Impact Areas

Primary group/area affected- Taxpayers who take the standard deduction (i.e., those who do not itemize deductions) would see the guaranteed deduction concept retained, with an additional temporary bonus in 2026-2027 that benefits most filers by raising their deduction amount, particularly for lower- to middle-income households up to the phase-out thresholds.Secondary group/area affected- Higher-income households approaching or exceeding the MAGI thresholds: the 5% reduction above thresholds will gradually reduce the size of the bonus, meaning the net benefit tapers for top earners.Additional impacts- Administrative and compliance considerations: The name change across the Code requires updates to forms, instructions, and computations in tax software and filings.- Budgetary/revenue effects: The temporary bonus represents a potential reduction in federal revenue for 2026-2027, with a partial offset for higher earners due to the phase-out.- Interactions with other deductions: Since it operates on top of the baseline guaranteed deduction, households may see a combined impact with other credits and deductions, particularly those already affected by MAGI-based phase-outs and the SALT cap.

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