What Trump’s Tax Cuts Mean For Dallas
Love him or hate him, President Donald Trump is about to put more cash in your pocket in 2018.
While about 83% of Trump's tax cut are headed to the wealthiest 1 percent of Americans, middle-income earners should feel a little increase in their checks too – and every bit helps.
A married Dallas couple making $45,215, the median HHI, provides us with a perfect example. We'll also assume that the couple claims two withholding allowances, gets paid twice a month and doesn't have anything else withheld before taxes. We're also combining their checks to make it easy.
In 2017, this particular couple would've paid about $139 in federal income taxes on about $1,884 in gross income on each of their 24 checks.
In 2018, claiming the same two deductions, the same couple can expect to pay about $111 in income taxes on the same $1,884 in wages, thanks to an increase in withholding allowance value and the couple's income being taxed at a maximum rate of 12 percent, rather than 15 percent, as it was in 2017. Overall they’ll save $672.
While the corporate tax rate cut in Trump's bill — from 35 percent to 21 percent — is permanent, the individual rate changes going into effect this winter will expire in 2025.
Other advice for our fictional Dallas couple?
Tax laws can be confusing, especially with so many major changes this year. If your tax situation is complex and you don't have the time, patience, or ability to maximize your tax return, seek the advice of a competent tax professional like Joe Garza of Garza & Harris.
We can’t stress enough that the recently-passed Tax Cuts and Jobs Act may not affect your 2017 taxes that you are preparing to file, but it will certainly change them for 2018. Take the time to review summaries of the changes and see how they will affect your 2018 filing. You may need to make changes during the year to optimize your results in next April's filing.