Following up on this thread where some of us tried to figure out how the tax law changes would affect our 2018 tax bills.
I had guessed that our taxes wouldn’t change too much, and I was more or less right. I am doing a little estimating, since I haven’t tried to do the calculations with a 2017 tax form, but here’s the upshot:
Our total federal income tax bill is about $1500 higher than last year, but roughly $2000 less than it would have been without the changes (we made more money, and we were set to lose an exemption for our daughter, who is now no longer a dependent).
Interestingly, our effective federal income tax rate (based on AGI, which excludes all the pre-tax savings from retirement plans and HSA contributions) was basically unchanged. It went up by a whopping 0.05% (from 14.65% to 14.70%). I think under the old law, it would’ve gone up by around 1%.
So, we saved a bit more than I thought we would, but still not that much in the grand scheme of our lives.
One other thing: this was the first time since the 1994 tax year that we haven’t needed to itemize for the Feds, though our state return still benefits from itemizing, at least so far.
Income stayed about the same and I get about an extra $190 per month in my paycheck. When I filed, the tax burden line was lower than 2017, but the refund was about the same as last year due to less money being withheld from my paycheck.
I didn’t redo 2017 with this year’s numbers either.
I have no dependents, but live in a high tax state, so I itemize for that every year. If it wasn’t for the high state taxes, I wouldn’t have anything to itemize at all.
My taxes aren’t done yet, but for 2017 my accountant told me what the difference would have been: roughly a $6,000 increase in tax burden with the new law. I expect that the difference will be even higher this year.
Tax went up $62 but because taxable income went up almost $3000. Didn’t screw me, but not the miracle promised.
A little PSA that you should be comparing 2018’s 1040 line 11 to 2017’s line 44 (or different if you did 1040A or 1040EZ). The amount of your refund is completely on you and your planning or lack of planning.
My tax return went from 80+ pages to just a few. I owed quite a bit more since I didn’t change withholding. Although I prefer not to get refunds because it galls me to give the IRS interest free loans, I changed withholding for 2019 to avoid having my “victory” over them be that spectacular. I can only stand on principle for so long, I guess.
My effective tax rate went from about 12% for 2017 to 17% for 2018. I figure the reason was the loss of tax deductions, instead of itemizing like 2017, I had to used the standard deduction for 2018. My accountant told me it’s going to get a little worse for me till I retire. I am now considering moving up my retirement from this time next year to sometime this summer.
As far as I know, charitable contributions remain fully deductible. What changed is that that increase in the standard deductions means that more people are going to be better off by not itemizing and, thus, will not take the charitable deduction.
Right. This is more or less what happened to us. In the past, the sum of mortgage interest, state income tax, property tax, and charitable contributions exceeded the standard deduction by a considerable amount, so we’d submit the itemized version. Now, that number is roughly the same as the new standard deduction (just a little below), so we just took the standard deduction. The old law also had the exemptions for us and our dependents, which lowered the taxable income even more. So the net effect is that our taxable income went up quite a lot–our modest raises plus the loss of the personal exemptions. Because the marginal rate brackets have been lowered, the effective rate, which is total tax liability divided by AGI (pre-deduction income, not taxable income), was basically unchanged, though, as I said, it was it bit lower than it would’ve been under the old law.
A broader concern is that there is now less incentive to make charitable contributions. I haven’t seen any reports on the effects on charitable institutions yet, though.
Higher standard deduction + no personal exemptions = about the same for us. Fortunately I noticed the change in withholding rates and added some to it so the bottom line bill is small. But people weren’t *supposed *to notice until after the midterm election, of course.
As usual, I used the state tax withholding (not the actual tax due) to do the itemization. If you itemize and get a state tax refund, that gets added to income on next year’s return; conversely, if you owe additional state taxes, you can deduct that payment on next year’s return. Didn’t matter, really, since the state income tax owed plus property taxes exceeded the $10,000 max, though not by much–Colorado has a relatively low rate.
I’m not sure why the state has an add-on deduction for charitable contributions. Given that the new rules tend to increase Federal taxable income, maybe it was easier to reduce that income rather than figure out how much to lower the rate to compensate for the revenue increase it would cause. Colorado’s TABOR law severely restricts how much revenue the state can collect without triggering automatic refunds. When I said “so far,” I meant that we still get the charitable deduction, but that might go away once they figure out how to change the tax rate to stabilize revenue. I have to confess that I haven’t kept up with the state tax law changes this past year.
We have always itemized in the past; this year with the changes in what is and it not deductible, we took the standard deduction. Our standard deduction this year was within a few hundred dollars of our itemized deduction last year, so the ‘extra’ $12K in taxable income from the removal of the personal exemption hurt.
I have no clue, and I’m not going to bother figuring it out. I’ve been in a cycle of “hypothetical taxes” and “gross ups” since 2011, and that didn’t end until just this year.
I’m a littler irked, though, that I still had to figure out all of my itemizations before taking the standard deduction, in order to decide whether or not it made more sense to itemize. At that point, I’d already done the work. Oh, well, I suppose that if nothing major changes, I can skip that part next year.
I should have changed it to calculate as itemized to see what the difference would be. When I did my return, IIRC, I would have had 12000 or 13000 in deductible income, but the standard deduction this year was 18000. So, that helped quite a bit. Also, the last time I got the Child Tax Credit (2016) it was $1000. For TY2018, it was $2000.
An interesting repercussion, I think, is that with the standard deduction so high that most/many people won’t itemize, I think less people will go out of their way to do deductible things.
For example, I always itemize, so dropping stuff off at Goodwill bumps that number up. This year I would have needed another 5k or so in deductions to make a difference. Had I known that, instead of donating what I did donate (a few hundred dollars worth of clothes), I would have stuck them on Craigslist and made a few bucks.
Another one that might be less noticed is buying a house. I would have deducted $10,000 or so in property tax and interest, but this year it didn’t matter. Granted, I already own the house so it’s moot, but that huge deduction was always a way to entice people to buy a home (getting a good chunk of their mortgage payments back).