Sunday, January 06, 2019

A Winter of Tax Discontent?

Income tax season is never fun. This one could be a real downer.

One reason: the new tax law created a much larger standard deduction – $12,00 for singles, $24,000 for married couples. Though some taxpayers will benefit, others accustomed to itemizing their deductions may feel shortchanged. A couple whose state and local taxes, mortgage interest and donations add up to, say, $22,000 will find that their accustomed deductions are worthless.

According to estimates cited by the WSJ, the number of returns claiming the mortgage-interest deduction for 2018 will drop to 16 million from almost 40 million. Returns claiming deductions for charitable contributions also are expected to drop by more than 50%.

Tax withholding could be another sore spot. The withholding tables for 2018 may result in some taxpayers receiving smaller refunds or owing more at tax time.

And, smaller or not, taxpayers' refunds will be delayed if the partial government shutdown persists.


Jim Gust said...

I'd be very happy to trade $22k of deductions as worthless if I could get a $24k deduction with no records and no paperwork. Plus a lower tax rate if my income is constant.

OTOH, there is the loss of the personal exemption.

As a single, my CT property taxes alone are far over the $12,000 (and will be going up sharply), so I am nicked by the $10k SALT cap. My other deductions probably don't amount to $2k, so I expect to use the standard deduction and pay more taxes than last year.

Still, my CT taxes are much higher than my federal taxes, more than double. Plus sales taxes. I am living in the wrong state.

JLM said...

Wow! Glad I'm no longer in Connecticut. Our property taxes exceed the SALt cap, but our NH income tax (which is levied only on income from savings and investments) is a relatively modest 5%.

JLM said...

Today the White House announced that it would have the IRS pay taxpayers their refunds.