How Tax Reform Will Affect Baby Boomers
by Susannah McQuitty
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The Tax Cuts and Jobs Act (TCJA) has been all the talk this year in financial circles, but how does it affect different taxpayers in different situations?
We’ve talked about how tax reform affects millennials and covered the basics of the new laws in our Tax Guide; now it’s time to look at another specific group. Today, that group is you, baby boomers!
To help visualize how tax reform affects different people in the baby boomer generation, we’ve created the attached infographic. Check it out for some specific examples!
Now, to the main attraction. What parts of the TCJA will affect boomers most?
The (almost doubled) standard deduction
The new standard deduction is almost double for each filing status—the end result is that a lot of taxpayers who itemized deductions on Schedule A in the past won’t have to this year.
Itemizing can still be more advantageous in certain situations, but it’s important to remember that Congress repealed some itemized deductions, like the deduction for unreimbursed employee expenses and tax preparation fees. While the $4,050 personal exemption is gone, the increased standard deduction makes up the difference for most boomers.
Adjusted tax bracket rates
In general, most brackets are now taxed at a lower percentage, and those tax brackets cover larger income ranges—meaning 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 (more money in your pockets!).
Tax Reform Estimator
We’ve covered a basic overview of how tax reform affects boomers with different 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 questions about tax reform, and make sure to check out the above infographic on the Tax Cuts and Jobs Act for boomers!
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