Taxpayers may be surprised when expecting refunds and instead finding they owe tax bills. Many whose returns provided refunds may instead pay taxes with their 2018 returns. This is due to a few of the new rules in the tax reform. First, the tax brackets have changed and secondly you no longer can take personal deductions. As a taxpayer, you need to review your W-4s from last year and examine state and local tax deductions.
Many might have seen their paychecks increase last year and not thought about why that was. The income tax brackets have been changed as follows:
2018 Individual Federal Income Tax Brackets
Single Joint Head of Household
10% tax bracket $0-9,525 $0-19,050 $0-13,600
Beginning of 12% bracket $9,526 $19,051 $13,601
Beginning of 22% bracket $38,701 $77,401 $51,801
Beginning of 24% bracket $84,501 $165,001 $82,501
Beginning of 32% bracket $157,501 $315,001 $157,501
Beginning of 35% bracket $200,001 $400,001 $200,001
Beginning of 37% bracket $500,001 $600,001 $500,001
If your income changes the tax bracket you are in, that will affect the amount that should have been withheld from your paychecks. If you did not make appropriate changes, you might find that you did not have enough withheld from your pay last year. In this case, you will have to pay for the deficit.
State and local tax (SALT) deductions have been capped. The limits are $10,000 for filing joint or head of household and for married filing separate $5,000. What many taxpayers may not realize is that this includes not only what they have paid on state and local income taxes but also property taxes, sales tax, and even tax for license plates on vehicles. Any amounts above the limit will not be deductible.
Contact Les Merritt and his knowledgeable staff for help figuring your taxes. If there were ever a year to get help from a CPA, this is that year. Les Merritt, CPA and CFP (Certified Financial Planner) is ready to lend assistance. He has helped families and companies for over 30 years with tax preparation and planning. Contact Les Merritt at (919) 269-8553 to assist you in preparing this year’s return, lowering your tax bills and making sure your deductions for your paychecks are correct for 2019.