2018 Tax Projection
2018 Tax Projection
We are fast gaining expertise in the new tax bill signed into law in December, and giving us a whole new world of taxes for 2018 and the future. As part of our tax work here completing 2017 tax returns, we are also including a sneak peek at the 2018 tax rates and rules, and preparing a comparison for each of our clients to estimate the effect on their 2018 tax returns. We know this can be very valuable to them, and we learn from each one we prepare.
What we are learning is surprising. We see a lot of people receiving a fairly significant projected tax savings in 2018, although the results vary greatly. For middle to lower income taxpayers, I have seen mostly nice savings. They are benefiting most by the enhanced child tax credits, that double from $1,000 to $2,000; and the cut in the 15 percent tax bracket to 12 percent; and the 25 percent being cut to 22 percent. The greater standard deduction is nice, but it is almost completely offset by the fact that they took away the personal exemptions. And for anyone that still expects to itemize, a bigger standard deduction doesn’t help at all, while losing the personal exemptions stings.
As income levels grow, I am seeing mixed results. The loss of exemptions, and the cap on all state and local tax deductions at $10,000 really makes a big impact to some folks. If you have outside employee business deductions, the loss of this write-off in 2018 is damaging. On the other hand, anyone that can qualify for the flow through business income tax deduction looks to gain a benefit, but these rules are the most complex in the new law, and hard to project the tax savings.
It is all a fun challenge, with most people gaining some tax advantage, but your neighbor’s savings may not be yours. Tax simplification disappeared during this process.
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