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.

 

What is Happening to the Standard Deduction in 2018?

A lot is changing this year (meaning next filing season) in regards to taxes, how they’re computed, and a lot of us in the industry are going to be playing catch-up when the dust finally settles.

But most people care about one thing when they hear the tax landscape is going to be completely different: How does this affect me?

I’m not going to tell you whether you’ll be paying more or less in taxes or getting a bigger refund (although best estimates puts it at about 75% of filers will see sizable reductions in their tax bill).

That’s not bad.

We’re not going to be talking about that, though. We’re only going to discuss one aspect of the bill, and that’s the standard deduction and what’s happening to it.

What is the Standard Deduction?

The standard deduction is one option you have if you do not itemize your deductions. Every year the amount changes because it is indexed for inflation.

However, it makes it so the first $X of the money you make is tax free. In the 2017 filing season, the standard deduction for most filers was $6300, but the amount changes based on your circumstances.

I Heard The Standard Deduction Was Going Away

A lot of things are going away next filing season, but the standard deduction is not one of them. In fact, the GOP wants to nearly double the standard deduction to $12,000. This means the first $12,000 of a single filer’s ($24,000 for married couples filing jointly) will be completely tax free.

And that is how most Americans will be getting that sizable tax cut this coming year.

But this is certainly a little ways away, and for now our concern is the current tax filing season and our current tax code.

 


Disclaimer: This information does not constitute financial advice. For specific information concerning your financial situation, please consult your local financial advisor.