If you're a wage-earner (W-2), read this - GOP praises, Dems question tax-cut boost in paychecks

[Snarkoleptic]

http://thehill.com/policy/finance/372968-gop-praises-dems-question-tax-cut-boost-in-paychecks

Taxpayers are starting to see bigger paychecks as a result of the new tax law, which Republicans hope will pay off for them in the midterm elections.

Democrats warn that Republicans may be overpromising, and have expressed concerns that a number of taxpayers expecting refunds may instead end up owing the IRS money next year.

The growing paychecks reflect the new withholding guidance issued by the IRS last month following enactment of the tax law. The guidance adjusts the amounts that companies take from their employees' paychecks for federal taxes.

--snip--

Withholding is based on taxpayers’ incomes as well as the number of allowances they claim on W-4 forms. Taxpayers claim more allowances, and get less withheld from their paychecks, if they expect to get more benefits from exemptions, deductions and credits.

Taxpayers who claimed a lot of allowances because they benefited greatly from itemized deductions under the old tax law might find that they owe the IRS when they file their 2018 tax returns next year. This may particularly be the case for people who live in high-tax states and relied heavily in the past on the state and local tax deduction, which is capped in the new law at $10,000.

[Squinch]

1. As a person who works for a living and does not live in a house, I am going to

be slammed by the deductions they have taken away. I'll pay in the thousands more in taxes.

[Snarkoleptic]

2. It seems to me that those with lots of children are going to get slammed.

Also, those with high $$ homes.

I'm in Illinois' 6th congressional district and this article scorches our republiClown incumbent, Peter Roskam.
It also looks at how incentives for banks to lend, will be affected.
https://medium.com/@sean_87437/how-the-gop-tax-bill-will-hurt-il-06-5e76c5e34c24

[Squinch]

4. I was looking at that and couldn't make sense of it. I don't have kids, so tell me where my

understanding is wrong, because I'm thinking it must be.

Here's what I understand:
Previously a person with kids had the $1000 child tax credit deduction per kid, but they also had the personal exemption for each child? Is that right? And now the $1000 is going up to $2000, but the personal exemption for the child of $4100 is going away?

That can't be right, can it?

Even those who will benefit will get a whole lot less than they are expecting. Everyone hears that the standard deduction has gone up 5500. No one realizes that the personal exemption of $4100 is going away. So they really only get $1400 in new deductions, which in the best case scenario for a person in the 28% bracket amounts to about $400 ish.

Hope that new pair of tires makes up for the havoc this will wreak on our economy.

[LuckyCharms]

7. A tax credit is a dollar for dollar reduction in your actual tax owed...

whereas an exemption is a reduction of taxable income, which flows through as a percentage reduction in the actual tax owed. Therefore, a credit is more valuable to the taxpayer's bottom line than an exemption is.

That being said however, your post is generally correct in the fact that there are a lot of smoke and mirrors being used in selling this "tax cut" to the public.

In my case:

a) Elimination of exemptions = apx. $9,000 times tax percentage worse off
b) Doubling of std deduction = apx. $12,000 times tax rate better off
c) Net = apx $3,000 times tax rate better off

So they are making a huge selling point out of doubling the standard deduction, when it actually only provides a very small benefit to me because of the other changes.

[Squinch]

8. I'm losing a boat load of deductions.

There are expensive classes required for maintaining my license. Also my expensive license fee. Also my state and local taxes.

We're trying to figure out what will happen to our co-op mortgage and property tax deductions, because our building's mortgage is quite a bit bigger than 750k and our property taxes are quite a bit more than 10k, so what happens to each shareholder's deductions for those no one can tell us. I assume they deduction will pretty much disappear.

I have some reimbursed travel expenses for work that are now going to be considered earned income.

The list goes on and on. My eliminated deductions amount to quite a bit more than 12K.

I am going to be slammed, because I work for a living and don't live in a house. AND it's increasing the deficit by a trillion dollars.

[LuckyCharms]

18. Yes, that's the thing...

While the higher standard deduction seems great, it gets eaten up pretty quickly when you consider the elimination of exemptions and other changes.

[Squinch]

9. So is this right?: if I have 100K taxable, and I'm at that 28% tax bracket, the additional $1000

tax credit makes my taxes

100K x 28% = 28K - 1k increase in exemption = 27k


Whereas the 4150 personal exemption which is being lost would make my taxes go from
100k x 28%
to
95,850 x 28% = 26,838

and that's if I have one child. If I have more, the increase in my taxes increases for each child.

[LuckyCharms]

17. Well, I had a whole response typed up...

but now I am not sure.

Here is what I would do...

Figure your taxes in two columns, before and after.

Gross income less exemptions less standard deduction less child credit = taxes owed.
Taxes owed minus taxes already withheld = refund or owed. Then, compare the bottom lines you get in both columns. This is assuming you use the standard deduction, rather than itemized.

Disclaimer: I am not a tax expert and this is just my understanding of the new law.

[Squinch]

19. Well, thank you for the effort and for the suggestion.

I know you haven't been feeling well. I will try it as you say. As I say. I have no kids but a trumper I know is crowing about how much she'll save in taxes. She has 4 kids.

[Squinch]

20. Feel better. I send you virtual hot tea and a

nice comforter wrapped around your feet.

[SWBTATTReg]

3. Really, I agree w/ you...folks like you will be ...

surprised at the full impact of these so called tax cuts. So far, according to stats avail., only 5% of businesses have somewhat rebated some of the anticipated tax cut savings back into wage bonuses and/or hourly increases. As my other half says, they'll believe it when they see it at work.

Also, I'm not seeing any reductions in pricing on any goods and/or services I've recently brought. If anything, the prices went up. Why?

Some big deductions were reduced in scope allowed as well as some eliminated. All in supposedly support of our businesses here in this country. As though they needed it.

These tax cuts, in effect, are a scam on this country, and weren't needed (proof is the already high stock market values before tRUMP came along), and whose values were restored by Obama's stabilizing and smart economic policies after the great recession of 2007-2008. Now, because of this, inflation is going to raise it's ugly head, and pricing is going to eat up any tax savings we might have seen.

[titaniumsalute]

5. I have decided to withhold the same % as 2017

I feel like I'm going to be slammed next year when I file for 2018. Might as well keep the same withholding as 2017 just in case. I'm not an idiot.

[Snarkoleptic]

11. This might help you decide if your W-4 needs to be updated.

https://www.hrblock.com/w-4-calculator/#/en/payCheck

[titaniumsalute]

16. I take 4 deductions

Wife, and two kids.

Next year after I file, depending on what the outcome is, I will make adjustments.

[modrepub]

6. Agree with Everything Said Here

Wife started putting together taxes yesterday. While each of us got more in our paychecks since the tax rate was reduced, we'll probably owe more next year since we're going to probably loose almost half of what we deducted this year. Wouldn't be fair to complain too much since my wife and my incomes added together probably puts us in the top 10% of earners. With two kids in college next year this whole switch is probably going to be a wash for us and we may up actually owing more next year.

Again, happy to be employed as I start pushing through my 50s. We all know what happens when you go through this decade of our lives.

[smirkymonkey]

10. This is what I am worried about. I just noticed a change of about $200 more a month in my

paycheck per month, but I am kind of nervous about what is going to happen on my 2018 tax return. I am used to getting about $2,500 back in taxes every year and kind of depend on that to pay off Christmas debt and other bills, etc.

[MichMan]

12. Don't understand the thinking of those who overpay all year to get a refund

I honestly don't understand the mentality of people who prefer to overpay their withholding all year so they can get a "refund" when they file. The best strategy is to adjust your witholding, so you always owe a few hundred dollars in April.

Maybe you wouldn't accumulate the Christmas debt and other bills in the first place if you did that

If you really wanted, you could increase your withhodling by an extra $100 a week and double your "refund"

[smirkymonkey]

14. Because, I wouldn't save it, I would probably spend it.

I know myself. Also, I don't ever want a tax bill at the end of the year. I know it doesn't make a lot of sense financially, but psychologically it works for me.

[former9thward]

13. If you are worried about it put the $200 in a special saving account.

That would be $2400 at the end of the year. Why people give the government no interest loans I will never understand. That is what you are doing when you get $2500 "back" at the end of the year.

[modrepub]

15. In Smirky's Defense

My savings account is giving me 0.05% APY so letting the government have a no interest loan doesn't mean much today (less than $1 for most accounts). On the other hand, it would be better to put that money into a 401k or a 529 account for future use or into a DRIP or your company stock.

[MichMan]

21. Others pay CC interest during the the year....

....just to pay it off with their refund.