I have no idea what will happen with us. My husband retired in December and is starting his own business. I’ll be retiring sometime this summer to care for my grandchild full time and I have no idea how much I’ll earn before I quit. So our income bracket is a total mystery.
But since he’s starting the business, we’re having a professional do our taxes for the first time - I trust an accountant more than I trust my understanding of the laws. Tho in the past, we used TaxAct, and I have assumed that their software at least has the input of tax professionals. Regardless, we’ll have to wait till next tax season to see.
I’ve run some rough calculations, but my 17 taxes (which I haven’t filed) are going to be different enough from my 16 taxes that it’s hard for me to say how 18 will differ from 17. I don’t know what my 17 return looks like yet. I itemized in 16. Probably won’t in 17. So the SALT changes probably won’t hurt me in 18.
Keep in mind that, even in “blue” CA, most people don’t itemize. So most people are going to see taxes go down.
But your point about the child deduction is well taken. We’ve been over this before and some people don’t quite get the difference between a tax deduction (taken off your income) and a tax credit (taken off your taxes due). The latter is a much, much better benefit. If you’re in a 25% bracket (used only for convenient math), you need a $4,000 deduction to be worth the same as a $1,000 credit.
Thing is that the child tax credit only applies through age 16, while the deductions apply for much longer. (There is also a credit for non-child dependents, which would apply to post-16 children, but it’s much smaller.)
In my case I think I’m going to about break even until my next kid hits 17, and pay more thereafter. For young couples with smaller children (and unlikely to itemize), it’s a huge savings.
Just to be clear, the tax credit applies if the child is under the age of 17 at the end of the tax year. Seems like a strange cut-off point to me, since most kids would still be in high school, but that’s what it is.
Here’s a “post change” tax calculatorfor those who want to get an idea how their taxes may be affected in 2018. I’m not advocating the accuracy of the site, it’s just one I found…
I have no idea. I did my taxes Monday and for the first time in years did not have enough itemized deductions and used the standard deduction. I am retired and do not work.
(Please do not hurt me;) but what is/was a personal exemption? I admit I just answer the tax soft wares questions and fill in the blanks.
The new tax law doesn’t take effect until the 2018 tax year, do if you just did your 2017 taxes you wouldn’t see any impact.
It indirectly impacted some people’s 2017 taxes in that some people consciously did things in 2017 in order to take advantage of more favorable treatment under the current law (most publicized example is prepaying real estate taxes), but for the 2017 taxes being done now you’re being treated under the rules in effect prior to the new law.
My paycheck has already gone up the past 2 weeks, by a few dollars. Since I run my own small business, I lowered my weekly pre-tax pay to save the company money, and I’ll still be getting about the same net pay.
My only deductions were my mortgage interest, state taxes and charity, which totaled under $12k this year and will continue to be under $12k each year. So I guess I’m back to 1040EZ. File for free! Yay?
Elimination of personal exemptions: bad
Increase in standard deduction: good
Limits on state tax deduction: bad
Increase in amount and applicability of child tax credit: very good
I actually think it’s the fourth thing I mentioned (child tax credit changes) that’s going to lead to a big drop in my tax bill, but I don’t know for sure yet. I think it’s going from 0 to $2000.
Since I don’t itemize, and don’t receive any credits that may have changed, I will benefit from the increase in the standard deduction (even with the loss of the personal exemption), so I expect my taxes to go down. My withholding has already dropped a noticeable amount, and I think that will probably hold so that I probably won’t have to pay any of it back when I do my taxes next year.
Since I started paying taxes, I always did my taxes twice a year. After filing around the end of the 1st quarter, I would recalculate my expected tax for the following year and adjust withholdings, etc. Then, at the beginning of the 4th quarter, I would do the same exercise, to see if my withholding was on track. This gave me enough time to make adjustments as needed. Over the years I had built a fairly decent model that calculated all of this while allowing me to enter in the appropriate variables.
Now I have to rebuild it. Oddly, I’m looking forward to it.
Between the passthrough income benefit and the tax rate we are in and the AMT changes, we should see a significant decrease in federal taxes.
And I would much rather pay for the CDC to tackle Ebola in Africa. Plus, I expect our state taxes will go up to cover cuts in the federal subsidies the state will get under the new budgets.
Hard to say as my situation will change this year, but I suspect my taxes will go down.
People need to get out of the mindset of “tax bracket.” It has some effects in some situations, but because the tax system is marginal, it doesn’t really affect you in most cases.
You get $4050 per person off taxable income on you return (e.g. married couple = $8100, single person with 2 kids, $12150). They removed that and instead increased the standard deduction, which also lowers your taxable income. How it effects you depends completely on your situation, it doesn’t appear to be net good or net bad.
Its awesome for people who don’t have kids and haven’t itemized in the past - they all got a raise.
It sucks for people who didn’t itemize before, but have three or five or seven kids. To me it looks like a huge middle finger to the middle American Evangelical movement, who often have more than 2.5 children and don’t have the incomes to itemize.
But hey, they’ll be able to take money out of those really well funded 529s to pay for private schools for their pre-college children!
I’m not sure I see how having an odd number of kids does anything in the new tax system ? For children under age 17 at the end of the year, you lose their personal exemption but gain an additional $1000 tax credit ($2000, was $1000)- in most marginal tax brackets that is a net advantage, or at worst close to a wash vs the old system.