Time to Celebrate the Tax Cuts!

Tax cuts worked!

Time to celebrate the tax gift President Trump and some in Congress gave most of us in 2018 and beyond. 

Take a look at your 2018 federal tax return and compare it to last year’s return.

How to compare your taxes:

On your 2017 federal return:

• Line 43. is your taxable income
• Line 63. is your total tax due

On your 2018 return,

• Line 10. is your taxable income
• Line 15. is your total tax due

Compare your taxable income and income tax owed on each return.

Even though my income was higher in 2018, my tax bill went down. Hooray! 

Most taxpayers recently filed their 2018 tax returns.  This time around your tax return looks much different than it has in the past thanks to the 2017 Tax and Jobs Acts Law. Not only does it look different (simpler for many), most people paid less in federal income tax in 2018.

The media jumped on the idea that some people received a smaller refund than they have in the past. For starters, don’t assume that if your refund is smaller than it was last year that you paid more income tax. It’s likely that you had less income tax withheld throughout the year and paid less overall in 2018 than you did in 2017. Remember that a tax refund is just a return of the extra tax you withheld or gave the government.

Thanks to the media bias against president Trump, many people wrongly believe that they paid more tax in 2018 and therefore the new tax law was bad for them.

In this case the truth doesn’t hurt, it’s actually worth celebrating!

According to H&R block : H&R Block: Taxes Down 25 Percent This Year

Who’s getting the Tax Break?

Perception vs Reality

Please take a close look at the table below

Why did tax reform work for most people?

Lower tax rates, wider brackets and higher standard deduction meant that many people had significantly fewer itemized deductions still came out ahead.

For me, not having to pay the Alternative Minimum Tax as part of the law change saved me thousands of tax dollars.

It’s no surprise to anybody that studies economics that the U.S. economy is booming because people have more money in their paychecks. Businesses also have more money and that goes to increasing wages, hiring more people and expansion. That booming combination has led to record breaking tax revenues going to the U.S. government.

Therefore, the government NEVER NEEDS TO “PAY FOR” A TAX CUT. The result of the tax cut was all-time record tax revenues.

Life is good on the tax and economic front. It’s unlikely that there will be any changes with a divided Congress.

If you were in the minority and didn’t pay less in tax in 2018, chances are you make quite a bit above the median income, or you live in a high property or state income tax state. These deductions were limited with the new tax law and impacted people that live in high tax states. A triple whammy, get stuck paying high state tax, high property tax and federal income tax. Ouch.

There are some good strategic moves that can lower your tax bill, especially for business owners wanting a retirement plan, people with a lot of taxable dividends and capital gains and seniors that are making charitable gifts.