Did Your Paycheck Just Grow Thanks to the Tax Cuts?

There’s a lot of big stuff happening now in the wake of tax reform. Many companies have named wage hikes, bonuses, and other increased compensations for their workers in the wake of a new, 21% flat tax rate for corporations.

This is different than the old marginal tax rate structure that extended all the way to 35%. That’s a lot of money to pay, even for a big, greedy corporation! Considering most people in America work for corporations, perhaps cutting down on the tax may lead to bigger paychecks which will hopefully lead to economic growth.

But of course, you’re going to want to know how this change is going to affect you now, because there’s been a lot of changes on the individual side also.

So, Did My Paycheck Just Get Bigger?

Hopefully you’re working for one of the companies that generously announced big bonuses.

But if you’re not, no, you likely have not seen the change from the new tax reform hit your paycheck yet. And the reason for that is because the IRS is changing the withholding tax tables and the change is going to be taking effect February 15th.

Now, it may end up taking longer for your employer to play catch up, so you may want to give it a little while longer just to make sure.

My Paychecks Are Growing? But That Means I’m Going to Owe Tax at the End of the Year!

Not necessarily! The reason that the IRS is changing around the tax tables is because you’re expected to keep more of your money thanks to the Tax Cuts and Jobs Act and owe less in taxes.

To compensate for this, instead of just giving you more money back at the end of the year in the form of a refund, the IRS is just going to let you have more each pay period.

 


Disclaimer: The information on this page is not meant to constitute financial advice. For specific information regarding your situation, consult your local financial advisor.

 

Author: Foxx Financial

We are focused on financial literacy and a want to help others grow assets, reduce and remove debt, or just understand financial concepts better. The site will be updated often so subscribe for more content.

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