Working Families Tax Cut Act Offers $2k-$4k Bonus Deduction for 2026-27, With Income Limits

The proposed "Working Families Tax Cut Act" aims to put some extra cash back into people's pockets, primarily by renaming the standard deduction to the "guaranteed deduction" and adding a temporary bonus amount for the 2026 and 2027 tax years. This isn't just a cosmetic change; it introduces a specific, additional deduction intended to lower taxable income for many filers during those two years.

More Than Just a Name Change?

Starting with tax years after December 31, 2025, what most people know as the "standard deduction" would be called the "guaranteed deduction" across the tax code, as outlined in Section 2. While the immediate practical effect of the name change itself is minimal, it sets the stage for the bill's main feature: a temporary boost to this deduction.

Decoding the Bonus Bucks

For tax years 2026 and 2027 only, Section 3 introduces a "bonus guaranteed deduction." The size of this bonus depends on how you file your taxes:

• $4,000 for those filing jointly or as a surviving spouse.
• $3,000 for heads of household.
• $2,000 for single filers and married individuals filing separately.

Think of it like this: If you're a married couple filing jointly, this bill could potentially knock an extra $4,000 off your taxable income in 2026 and 2027, separate from the regular guaranteed (standard) deduction amount.

The Fine Print: Income Caps and Future Adjustments

This bonus isn't for everyone, though. The extra deduction starts to shrink if your Modified Adjusted Gross Income (MAGI) goes above certain levels. The phase-out begins at:

• $400,000 for joint filers/surviving spouses
• $300,000 for heads of household
• $200,000 for all other filers

For every dollar your income is above these thresholds, the bonus deduction is reduced by 5 cents. For example, a head of household earning $320,000 (which is $20,000 over the $300,000 limit) would see their $3,000 bonus reduced by $1,000 (5% of $20,000), leaving them with a $2,000 bonus. High earners will see the bonus disappear entirely. The bill also includes a provision to adjust these bonus amounts for inflation after 2026, meaning the $4k/$3k/$2k figures could slightly increase in 2027 depending on economic conditions.