How Tax Reform Will Affect Millennialstax tips | June 15, 2018 | By Susannah McQuitty
Now that we have an awesome overview of tax reform on our Tax Guide, it’s time to narrow down how tax reform will affect different groups of people. Today, that group is the millennials!
Our design team has created this awesome infographic to give you an idea of how the Tax Cuts and Jobs Act impacts specific family and financial situations. You may not match up exactly with the examples provided, but hopefully you’ll come away with a clearer understanding of tax reform and what it looks like in real life.
To help you understand the numbers a bit better, here are some details about how we broke down the information and how you can apply that knowledge to your own tax situation.
Tax reform details that will most affect millennials
The sections of the Tax Cuts and Jobs Act that affect most people are few but far reaching: You’ll definitely want to know about the updated tax brackets, the new standard deduction amounts (and elimination of the personal exemption), and the updated Child Tax Credit (CTC).
In general, most brackets are now taxed at a lower percentage, and those brackets cover larger income ranges—so you can make more money before moving up a bracket. If you work for someone else, you probably noticed that your employer applied the new IRS withholding tables earlier this year, so you’ve had less tax withheld each paycheck and more money in your pocket.
The $4,050 personal exemption has been repealed, but the new standard deduction is almost double for each filing status – the end result is that a lot of taxpayers who went through the process of reporting itemized deductions on Schedule A in the past won’t have to this year. Less work at tax time. Less headaches.
You can still itemize if its more advantageous; but it’s also important to note that Congress repealed some itemized deductions, such as the deductions for unreimbursed employee expenses and tax preparation fees.
If you have kids, the updated CTC and repeal of the personal exemption will affect you too. The CTC amount has been doubled to $2,000 per child, and $1,400 of that amount is refundable. You’ll no longer have the personal exemption per member of your household, but the new standard deduction and CTC rates should make up for it.
What’s this “net benefit?”
If you look at the infographic, you’ll see that instead of a refund amount, there is a number called the “net benefit.” The net benefit amount factors in the new withholding tables for 2018—you now have more money in your pocket from each paycheck, so we looked at both the law changes and the withholding changes to arrive at the overall net benefit for these taxpayers.
Tax Reform Estimator
So there’s a basic overview of how tax reform affects millennials in different states and tax situations, but what about you?
Your taxes are unique, and that’s why we’ve adapted our tax estimator to calculate your 2018 return with tax reform in mind. Just follow the 4 simple steps, and when you get your results, hit the “How Will Tax Reform Affect Me?” button for a breakdown of how the tax law changes might impact you.
Let us know in the comments if you have any more questions about tax reform, and make sure to check out our infographic on the Tax Cuts and Jobs Act for millennials!