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How do the new tax rates affect you?

Sam Foltz

January 19, 2018

As we all know (if you don’t, I’m not sure what rock you’ve been sleeping under), Congress presented and the President signed in to law the Tax Cuts and Jobs Act (TCJA) on December 22, 2017.  This law amends the Internal Revenue Code of 1986.

This new law affects us all.  No taxpaying person in the United States will escape these changes.  For some of us, the changes are good; some bad; and others will really not see much of a difference.  The changes are sweeping and voluminous….frankly, some of the changes are complex and take quite a bit of study and calculation to see how they have changed a person’s tax position and by and large everyone is affected just a little bit differently.

I am devoting this blog in the foreseeable future to outlining or “highlighting” the changes included in this act to break it down for you piece by piece.

For this blog, let’s talk about tax rates.   Under the former law and the new TCJA, there are seven tax brackets.  Formerly, they were 10%, 15%, 25%, 28%, 33%, 35%, 39.6%.  Under the TCJA, the new rates are 10%, 12%, 22%, 24%, 32%, 35%, 37% . 

 

But how does this affect you?  Our taxes are calculated progressively.  That means that you pay the lower percentage for the first part of your income, the next bracket up for the next step, and so on.  As an example, a couple filing joint that makes $156,000 will be taxed as follows under the TCJA: 

                10% of $19,050 + 12% of the next $58,350 = 22% of the remaining $78,600 = $26,199 

Under former law this tax would have calculated at $32,652.50   Sounds good, right?  Well, hold your horses.  What Congress giveth, they take away somewhere else.  Stay tuned to our next blog for more info. 

If you need assistance in figuring out just how TCJA impacts you, give us a call!

   

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