2020 Congressional Research Service Report on TCJA Impact on Families

The Congressional Research Service (CRS), which serves as a nonpartisan shared staff to members of Congress and congressional committees, and operates solely at the behest of and under the direction of Congress, released a report dated January 24 on the “Federal Income Tax Treatment of the Family Under the 2017 Tax Revisions.” The document examines certain temporary changes made to the federal tax code under the Tax Cuts and Jobs Act (TCJA or the Act) including tax rate changes, elimination of the personal exemption, increase in the standard deduction and changes to the child tax credit. While many of the changes included in the Act were meant to be permanent, the report notes that the particular changes addressed in the report are only temporary in nature and set to expire after 2025.

The introduction to the report notes that the “federal income tax treatment of the family is affected by several major structural elements applicable to all taxpayers: amounts deductible from taxable income through standard deductions, personal exemptions and itemized deductions; the rate structure, which varies across taxpayer types; the earned income credit and the child credit; and the alternative minimum tax. Some of these provisions only affect high-income families and some only low-income families, but they are the tax code’s fundamental structural features.”

The TCJA effectively eliminated personal exemptions claimed by the taxpayer, his or her spouse (if married) and any dependent, offsetting those losses for most taxpayers with an increased standard deduction. Further, the increase to the child credit more than offset losses from the eliminated dependent exemption for many taxpayers. Though the effect was most notable for joint return filers, the TCJA actually lowered rates for all three main types of individual tax returns (joint, single and head of household).

The TCJA also retained significant aspects of the law that existed prior to 2018. The CRS report notes that the “income tax code after the 2017 tax revision remains progressive across income levels for any given type of family, although effective tax rates are slightly lower.”