This article was last updated on December 20
The latest GOP tax reform bill will affect most Americans when it comes to their 2018 taxes (filed in 2019). While everyone has their own unique financial and tax situations the answer to how the Trump/GOP tax changes will impact American tax payers are driven by these four main factors:
- How much you earn – your pay check,
- Filing status and dependents/children (thanks to larger child tax credit),
- State you file taxes from,
- Your itemized deductions and the larger standard deduction
Lets look at each of these factors in more detail.
How Much You Earn (i.e your Pay check). This is by far the biggest driver of how much you pay in taxes. You need to earn money/income to pay taxes, in most cases. With the new tax brackets proposed in the GOP tax plan most tax bracket income (AGI) thresholds are being raised which would mean an instant tax cut and higher pay check for most Americans – all other tax items being equal. In fact tax break calculators from leading publications like the Washington Post, New York Times and the Wall Street Journal show that most Americans earning less than $250,000 will get a tax break, even if they itemize deductions. Savings range from $1,200 to over $6,000 for varying filing status’.
Filing Status and Dependents. Your filing status would drive which tax bracket you fall in to (married couples will benefit most) per the table below. But it is provisions like the expanded child tax credit that really lead to a bigger tax cut for many families. With the doubling of this tax credit many households should see a nice bump in their 2019 tax refund.
2018 Income Tax Brackets and Rates under Reconciled/Final Trump GOP Tax bill
|Tax Rate||Single Filers||Married Filing Jointly||Married, filing separately||Head of Household|
|10%||Up to $9,525||Up to $19,050||Up to $9,525||Up to $13,600|
|12%||$9,526 to $38,700||$19,051 to $77,400||$9,526 to $38,700||$13,601 to $51,800|
|22%||$38,701 to $82,500||$77,401 to $165,000||$38,701 to $$82,500||$51,801 to $82,500|
|24%||$82,501 to $157,500||$165,001 to $315,000||$82,501 to $157,500||$82,501 to $157,500|
|32%||$157,501 to $200,000||$315,001 to $400,000||$157,501 to $200,000||$157,501 to $200,000|
|35%||$200,001 to $500,000||$400,001 to $600,000||$200,001 to $300,000||$200,001 to $500,000|
State Taxes Filed from. With the elimination of several deductions, including state and local taxes (SALT), many people in high taxing states will be adversely hit by the loss of this deduction. Hence folks in states where there is no state tax will fare much better off under the Republican tax plan. No surprise these are heavily leaning Red GOP states.
Itemized Deductions. The Trump/GOP tax bill has cut or curtailed several deductions and the personal exemption, but offset that by doubling the standard deduction to $12,000 and $24,000 for singles and families respectively. More people will now chose to take the larger standard deduction and less itemizing, which studies haves shown will result in larger average tax refunds.
Most of the tax cuts in the GOP bill will take effect in January, and many workers will see bigger pay checks from reduced tax withholding by February 2018.
How will the Tump/GOP tax cuts affect you? And what do you think about them?