Saturday October 20, 2018
Tax Cuts and Jobs Act Single and Married Couple Examples
The nonpartisan Urban-Brookings Tax Policy Center has published seven examples for married couples and single persons. These examples are helpful in understanding how the substantial tax changes will affect individual taxpayers.
- Married Couple, Children Ages 10 and 12 - This married couple with $75,000 of family income in 2017 receives personal exemptions, takes the standard deduction and calculates the tax. The couple receives $2,000 in child tax credits and pays tax of $3,858 in 2017. In 2018, the same couple loses the personal exemption, but the standard deduction almost doubles to $24,000. They also have $4,000 in child tax credits. Their tax is reduced by $2,119 to a total of $1,739.
- Married Couple in High-Tax State - A married couple with adjusted gross income of $135,000 in 2017 will receive personal exemptions and be able to deduct their state and local taxes. Their tax is $15,508. In 2018, the same couple takes the $24,000 standard deduction rather than the itemized deduction and their tax is $16,299. Their tax has increased $792.
- Married Couple in Low-Tax State - The same couple with income of $135,000 lives in a low-tax state and has itemized deductions of $24,300 in 2017. Their tax bill is $16, 908. In 2018, the couple takes the $24,000 standard deduction and has tax of $16,299. The 2018 tax is $609 lower.
- Married Couple with No Children - This married couple with moderate income of $30,000 and no children takes the standard deduction in 2017. Their tax is $870. In 2018, they lose their personal exemptions but the standard deduction is nearly doubled to $24,000. Their tax of $600 is $270 lower.
- Single High-Earner with Wage Income - A single person with a substantial income of $250,000 will have itemized deductions in both years. The itemized deductions in 2017 are $46,000 and there is alternative minimum tax of $3,345. The total tax is $52,366. In 2018, the single person has itemized deductions of $30,500, has no alternative minimum tax and the total tax is $52,515. This tax is $149 higher.
- Single High-Earner who is Self-Employed - If the single person with income of $250,000 is self-employed, he or she could qualify in 2018 for a 20% reduction in tax rate. The 2017 individual with self-employed income again has $52,366 in tax. Because the 2018 individual with self-employment income receives the 20% lower tax rate, his or her taxes are reduced by $14,485 to $37,882.
- Lower-Income Single Taxpayer - A single person with moderate income of $30,000 in 2017 benefits from a personal exemption and standard deduction. The tax is $2,426. In 2018, the single person loses the personal exemption but the standard deduction almost doubles. The tax is reduced by $457 to $1,970.