Introduction

Under current law, the standard deduction, which is indexed to inflation, is currently $13,850 for single filers and $27,700 for married taxpayers filing jointly. Beginning in 2026, the value of the standard deduction is scheduled to approximately halve in value, as per expiring provisions of the 2017 “Tax Cuts and Jobs Act” (“current law”).

In response to these expirations, lawmakers in the majority on the House Committee on Ways and Means recently released the Tax Cuts for Working Families Act. The legislation would increase the standard deduction for tax years 2024 and 2025 by providing taxpayers a “bonus” standard deduction. The proposed bonus amount is $2,000 for single filers, $4,000 for married filers, and $3,000 for heads of household. Bonus amounts would be indexed to inflation and phase out for filers with Adjusted Gross Income (“AGI”) above $200,000 ($400,000 if married). The legislation also renames the standard deduction to the “guaranteed deduction.”

Key Points

• The Tax Cuts for Working Families Act would increase the standard deduction by $2,000 ($4,000 for married filing jointly returns) for taxpayers below an income threshold. This expansion, structured as a “bonus” value, would apply only for tax years 2024 and 2025.
• PWBM estimates the proposal would reduce revenues by $96 billion over the budget window. If the bonus values were extended permanently, the total budget window cost is between $419 billion and $527 billion, depending on whether Congress extends individual tax cuts set to expire at the end of 2025.
• The proposal would cut taxes for a majority of households in 2024. After-tax incomes would rise by at least 0.5 percent for households from the 20th through 90th percentiles of the income distribution; bottom-quintile households, and those in the top 1 percent, generally would not benefit.