Tax Cuts and Jobs Act

Definition

The Tax Cuts and Jobs Act is a comprehensive tax reform law passed in 2017 by the U.S. Congress that significantly altered the federal income tax structure for both individuals and corporations, with most of its provisions set to expire in 2025.

Analogy

Think of the Tax Cuts and Jobs Act like a big sale at your favorite store. Just as prices are lowered during a sale, this act reduced tax rates for many Americans. However, just like how sales eventually end, most of these tax cuts are set to expire after a certain period.

Related terms

Corporate Tax Rate: This refers to the percentage of corporate profits paid out as taxes. The Tax Cuts and Jobs Act lowered this rate from 35% to 21%.

Standard Deduction: This is an amount that taxpayers can subtract from their taxable income. The act nearly doubled standard deductions.

Individual Mandate Penalty: This was a fee charged to individuals who did not have health insurance under the Affordable Care Act (Obamacare). The act effectively eliminated this penalty by reducing it to zero.