<< Back to all Blogs
Login or Create your own free blog
Layout:
Home > Taxes - Two Ways
 

Taxes - Two Ways

February 9th, 2019 at 01:42 pm

Because I had been reading so many stories about refunds v. owning money as a result of the new tax changes, I decided to do our taxes two ways: using last year's tax code and this year's because everything else could be a result of withholding/different earnings/other factors.

This was easy to do, because I do my own taxes and I use Turbo Tax. I just opened a new file in last year's program and entered the info side by side with this year's program.

My dad said he had been planning to do the same thing: like father like daughter! My dad is 86 and still does his own taxes. The first time I did mine, he sat patiently with me as I did my (then) very simple return.

Ok, so this year we are getting back $4475 more than we would have under the old tax code. That is insane (and not in a good way, except for us it's good, but not for the country).

This is the part of the post where things get nerdy. But this is SavingAdvice, so you're probably into this! This is why I think the difference is so much in our favor:
- Standard deduction - we always took the standard deduction so the difference is pretty dramatic for us (we never itemized)
- Child tax credit - this gained us $2000 (would have been 0 under the old tax code)
- I made some pass-through money (my business profit which is taxed as personal income, and under the new rules, 20% of that is just written off
- I guess we end up in a lower tax bracket because they changed the brackets (we would have been in the 28% tax bracket last year, and now the same income is 24%)

All of this is great for us, as I mentioned, but completely unfair. Of course we can use the money (D may have to go back to the UK, but that's a different post and we are saving for college) but we shouldn't have been the ones to get a tax break. We make a good living (with both of our salaries about 120k) and I feel like this should have been aimed more at people less fortunate. Besides giving to college, some of this refund will be given as a charitable donation (along with the money F raised by making friendship bracelets for a local non-profit that deals with domestic violence).

4 Responses to “Taxes - Two Ways”

  1. Dido Says:

    You inspired me to try the same exercise. If I'd had the same income in 2017 as in 2018, my taxable income would have been $2,921 less (because I had nearly 15k between itemizing under the old law + the personal exemption, vs just the 12k standard deduction under the new law), but I would have paid $784 MORE in tax, because of the difference between the 25% and 22% brackets.

    A lot of benefit comes from the lower (and expanded) brackets, plus for people who have children, the Child Tax Credit gives back some of the benefit that the loss of personal exemptions took away.

  2. rob62521 Says:

    That's terrific you are realizing so much more! I'm not sure we are going to benefit very much since we are both retired, but feds do take taxes out of our pensions.

  3. LivingAlmostLarge Says:

    Not really with the standard deduction and 3 exemptions you were at $12,700 + (4050*3) = $24,850. So you were ahead there. But the child tax credit means you were above $150k so probably 28% bracket. Now 22% bracket which is where you $4475. Real savings is $2k child tax credit.

    I'm saving $20k possibly more.

  4. Buendia Says:

    Well below $150!!! We're more like $110... I agree child tax credit accounts for about half!

Leave a Reply

(Note: If you were logged in, we could automatically fill in these fields for you.)
*
Will not be published.
   

* Please spell out the number 4.  [ Why? ]

vB Code: You can use these tags: [b] [i] [u] [url] [email]