Are you now seeing the “benefits” from the new tax bill in your paychecks? I received my first check that reflects the new tax cuts this past week and the results were not all that impressive to me. Now, I work fulltime for the federal government in a supervisor’s role. I am also married with no children and do not itemize my taxes as we do not have enough to do so we utilize the standard deduction.
First, let me say I saw an increase in my pay of approximately $79 in tax savings or about $2,050 a year in savings. While it is not the $4,000 pay increase I was hearing when they were trying to pass the bill it is about half that. So with an extra few dollars in my pocket, I decided to see what about the other issue I had heard about when they were passing this bill, tax withholdings from your paycheck.
Now as I stated I am married with no children meaning we now have the standard deduction for a married couple or about $24,000 in standard deductions. Then I found an amazing Excel spreadsheet that will estimate your 2018 taxes by using information off of your paycheck. Now here is where it gets interesting and scary at the same time. On my W-4 I had elected married and two exemptions which would be fairly standard for someone in my position. But when I put my estimated after deduction pay into the spreadsheet and my actual tax withholdings I was in for quite a shock that was alluded to in the rumors I had head prior to the passage of the tax bill.
Without my wife’s information and just my own, we owed approximately $3,600 in taxes which when I add my wife’s information will actually increase even more. Now to put that into perspective we owed about $1,600 for 2017 with my W-4 being married and two exemptions and my wife’s being married with zero. If 2018 is anything like 2017, we will end up owing several thousand more at the end of the year when compared to 2017.
Now the overall tax bill will be a few thousand lower than 2017, but due to the way the tax withholdings are calculated, we will owe a considerable amount more than previous years. So if you do not check to see how your W-4 and the tax withholdings affect your tax bill now, you may be in for a very nasty surprise come tax time in 2018.
If you are interested in the Excel spreadsheet that I found and used to estimate my 2018 taxes, please send me an email at kirk@kirkgmeyer.com, and I will send you the file. For those of you who have taken advantage of my email newsletter and the free Excel spreadsheets, I have offered I will be sending out an email soon with a Dropbox link to the spreadsheet so there will be no need for you to email me and ask for it.
Yes, my taxes, on the whole, are indeed lower for 2018 but not to the degree that was promised and advertised by the politicians. And yes I see about a $2,000 increase in my take-home pay. But I am also seeing about at least a $2,000 tax liability that I will owe next year if I do not adjust my withholdings on my W-4. And that is above the tax bill of $1,600 for 2017.
Pay close attention to your tax withholdings and not just the modest tax savings in your paycheck. If you do, you may be extremely shocked when it comes time to file 2018 next year.
If you have any questions or need any assistance, please do not hesitate to contact me directly or by leaving a comment on the site.
After talking to co-workers about the child tax credit I did some additional research for those of you with children. You are losing the $4,000 personal exemption and $1,000 tax credit if you are in the 25% tax bracket. But you are gaining an additional $1,000 in the child tax credit for a total of $2,000. Meaning it is a wash and there is very little added benefit from this change.
After talking to co-workers about the child tax credit I did some additional research for those of you with children. You are losing the $4,000 personal exemption and $1,000 tax credit if you are in the 25% tax bracket. But you are gaining an additional $1,000 in the child tax credit for a total of $2,000. Meaning it is a wash and there is very little added benefit from this change.