On December 22, 2017 President Trump signed the largest income tax change in thirty years.
It is a complex bill with many changes, but for the most part taxpayers will be paying less taxes in 2018. With 3 simple examples I shall try to demonstrate the impact this new law may have on your own situation.
A single person making $50K using the standard deduction will pay $5,638.50 in 2017. Compare that to $5,223.75 in 2018 – a savings of $414.75.
A married couple filing joint return using the standard deduction with no dependents will pay $11,277.25 in 2017. Compare that to $10,447.50 in 2018 – a savings of $829.75.
Finally, a married couple using the standard deduction with 2 dependents under 17 will pay $7,732.35 in 2017. Compare that to $6447.50 in 2018 – a saving of $1,284.85.
The driving factor behind the savings is the increase in the child tax credit as well as standard deduction. Whereas currently about 70% of taxpayers use the standard deduction, the new tax law is expected to rise this number up to 95%. An impact on states with high property and income taxes is also anticipated since the new law also dictates the limit of itemized deductions for state and local taxes for not to exceed $10K.
Ultimately, this article only covers the impact of the individual tax changes, the corporate changes are much more dramatic. Please consult a tax professional for more complete information.
Written by Michael Ericksen, WAC Solution Partners- Midwest