Tax Cut and Jobs Act by Becky Gideon, Supervisor of Payroll, Marion County Schools

In February 2018, the tax tables were updated and most Americans saw an increase in their take home pay.  This excited some people and frightened others as many of us we were unsure how the Tax Cut and Jobs Act (TCJA) was going to play out when filing taxes in 2019.  Payroll professionals across the U.S. spent a lot of time in 2018 reaching out to their employees to help educate them on how the Tax Cut and Jobs Act (TCJA) could affect their 2018 tax return.  Now that W-2s have been issued for 2018 and returns are being accepted, what are the results? Well….it really depends on each taxpayer’s situation.

Happily, it appears that some taxpayers are still receiving refunds.  The increase in the standard exemption from $12,700, for a married couple filing joint, to $24,000 helped some households.  There were also changes to the child/dependent tax credit.  The largest change was that maximum income, based on the taxpayers modified adjusted gross income, for this credit significantly increased in 2018 for single and joint filers.  This was a great surprise to those who became eligible for the credit that did not receive it in 2017.  This change left them dancing all the way to the bank while wondering what all the TCJA hype was about.

These taxpayers will probably continue to receive good news as both of these changes were designed in TCJA to keep up with inflation.  For a taxpayer to determine if they are eligible to file for the child/dependent tax credit, taxpayers will want to see their tax professional.  The IRS has also designed a tool called the Interactive Tax Assistant to help.  For taxpayers that do their own taxes additional information on the Interactive Tax Assistant and IRS publication 972 can be found on their website at IRS.gov. https://www.irs.gov/help/ita/interactive-tax-assistant-ita

Another big change began in 2018 when the TCJA eliminated personal exemptions.  The ability to claim a personal exemption will affect all taxpayers.  The larger the family the bigger the impact.  On top of that, the flipside to the increase in the standard exemption mentioned earlier, is that if a taxpayer has itemized in the past many of those deductions are now gone or capped.  Those who usually itemize and didn’t have other credits have the possibility of seeing the darker side of the TCJA, leaving those who weren’t informed or unprepared for the changes owing Uncle Sam.

The true results of the impact of the Tax Cut and Jobs Act are still unknown.  Once taxpayers have finished filing we will be able to see the picture more clearly.  In the meantime for taxpayers to avoid being in an adverse situation for 2019, it may be helpful to visit IRS.gov.  Their tax calculator can help in understanding further and future impacts by estimating their 2019 tax liability.  In doing so they can spend the rest of 2019 knowing their taxes are covered.