It's that time of year again, tax season. As your W-2's and 1099's come in you can now start trying to figure out what your tax return might be. Knowing where you stand can be helpful when planning in case you have to pay into taxes at all this year.
The tax code had some changes made to it recently that go in affect this year. For the most part, the brackets stayed roughly the same from last year. The big change happened in the standard deduction, which nearly doubled. This can mean getting a lot more back in your tax return, or at the very least a reduced tax liability.
If your income changed at all you should take a look at the new brackets to see how it might affect you. Your tax bill (or return) could look different. Hopefully, the changes are a net positive for you as the drastically higher deduction should mean less tax owed.
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When filing your taxes this year you will notice that your taxes may look a little different. The income brackets changed slightly as the upper thresholds increased by around 2% per bracket. If you were close to the threshold of either tax bracket last year, you might see some changes in your return this year.
For comparison purposes, here are what the 2018 federal income tax brackets looked like:
|Rate||Unmarried, Taxable Income Over||Married filing jointly, Taxable Income Over||Head of household, Taxable Income Over|
And this is what the federal income tax brackets look like in 2019:
|Rate||For Unmarried Individuals, Taxable Income Over||For Married Individuals Filing Joint Returns, Taxable Income Over||For Heads of Households, Taxable Income Over|
As we mentioned previously, the standard deduction this year nearly doubled. This increase means that people who take the standard deduction should see their tax bill lower. I should specify that this doesn't exactly mean that your tax refund will double, but more so you will see a sizable increase.
Some 2019 tax return calculators are starting to pop up with the new deduction. Plug your numbers into them to get a rough idea of how your taxes this year might shake out. If you are feeling really ambitious, compare it to last years to see what the increase is.
Standard tax deduction in 2018 vs 2019:
|Filing Status||2018 (Tax year 2017)||2019 (Tax year 2018)|
|Married, filing jointly||$12,700||$24,000|
|Head of Household||$9,350||$18,000|
The one drawback is to the standard deduction increasing is that there are now less itemized deductions. We won't get into the specifics in this post, but know if you do a lot of itemization you might not get as much benefit from that this year. The IRS has a nice blog post about the changes and how it could affect you.
Overall, most people should see a pretty big change. Everyone's tax situation is different, but if your numbers are similar to last year you will likely get more back. This should be a nice little bump to start the year off with.