Understanding the New Tax Brackets in the Tax Cuts & Jobs Act & How it Could Affect You

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Learn about the “new tax brackets” and how you can more effectively apply changes in the tax law that occurred in the New Tax Cuts & Jobs Act on your 2018 tax return…

In this discussion we will look at a couple who filed MFJ in 2017 and received a refund of $4,300 on their Federal return and a refund of $800 on their State (Georgia) return. 

We will now look at and provide 2018 projections under the new tax law. 

Keep in mind this is a real world scenario, however this is an example only as all tax filings are unique and will vary from person to person. 


Income 74,711

Sch. C  ($4,000) loss

AGI $70,711 (line 37 form 1040)

Standard Deduction ($24,000) example 1 new law  or Itemized Deduction ($29,000) example 2

Taxable Income: $46,711 if using the new Standard Deduction, or $41,711 if Itemizing at same amount ($29,000) as on their 2017 tax return

2018 tax brackets and income ranges for Married taxpayers Filing Jointly and Surviving Spouses

  • 10%: $0 to $19,050 of taxable income
  • 12%: $19,051 to $77,400
  • 22%: $77,401 to $165,000
  • 24%: $165,001 to $315,000
  • 32%: $315,001 to $400,000
  • 35%: $400,001 to $600,000
  • 37%: over $600,000
  • Standard deduction: $24,000 

Tax  $5,224 or 4,624

Less: Lifetime Learning Credit $2,000

Total Tax: $3,224 or $2,624

Less: Dep. Tax Credit $1,000

Total Tax: example 1 $2,224 or example 2 $1,624

Less: Withholding $2,028 (same as 2017 tax year) 

Owe ($196) example 1 or Refund $404 example 2

Remember 2017 Refund was $4,300!

If dependents were under age 17 (the 2 dependents were both over age 17 in the above example) Child tax credit (would replace Dependent Tax Credit) of $2,000 per child would reduce their taxable income to zero with a portion of the $2,800 refundable credit coming into play based on their filing parameters.

Total Tax $3,224 minus $4,000 = $776 tax credit allowed, or

Total Tax $2,624 minus $4,000 = $1,376 tax credit allowed

$776 refundable credit plus withholding of $2,028 means refund would go to $2,804 in example 1

$1,376 refundable credit plus withholding of $2,028 means refund would go to $3,404 in example 2—still about a $900 dollar difference from their 2017 tax refund of $4,300 when itemizing where their dependents were over age 17.

Example assumed Schedule A amounts stayed the same as in 2017 and they do not qualify for the EIC.

With the new 2% itemized deductions now a thing of the past and limitations on state and local taxes that schedule A amount could be lower depending on your individual circumstances.

That lower amount could have a negative effect on your Federal and State Income Tax filings.

State (Georgia) Federal AGI 70,711

Enter the standard deduction that corresponds to your marital status. n Single/Head of Household.............$2,300 n Married Filing Separate................. $1,500 n Married Filing Joint........................$3,000 n Additional Deduction.....................$1,300

Less: Standard Deduction ($3,000) 2018 tax year and (proposed $6,000) 2019 tax year or ($29,000 from Federal Itemized Deductions) $67,711 example 1 or 41,711 example 2

Less: Exemptions ($13,400 MFJ--$3,000 x 2 for husband and wife and $3,700 x 2 for dependents) $54,311 or $28,311 @ roughly 5.2% tax rate

$2,824 in taxes owed example 1 or $1,472 in taxes owed example 2

Less: Withholding $2,044

Owe ($780) Example 1 Standard Deduction, or

Refund $572 Example 2 using Itemized Deductions—2017 refund was $800 in Georgia when itemizing

NOTE: The amounts for Georgia would be the same whether your dependent(s) were under age 17 or over age 17 unless Georgia changes the standard deduction, exemption amount or other items on their tax forms.  Therefore a reduction in their refund from the 2017 tax year would occur.

Here's how the new 2018 income tax brackets and increased standard deductions break down for every type of taxpayer.  You can use the above format to get a heads up on where you will fall in 2018 on your federal return by plugging in the appropriate numbers. 

2018 tax brackets and income ranges for single taxpayers
  • 10%: $0 to $9,525 of taxable income
  • 12%: $9,526 to $38,700
  • 22%: $38,701 to $82,500
  • 24%: $82,501 to $157,500
  • 32%: $157,501 to $200,000
  • 35%: $200,001 to $500,000
  • 37%: over $500,000
  • Standard deduction: $12,000

2018 tax brackets and income ranges for married taxpayers filing jointly and surviving spouses
  • 10%: $0 to $19,050 of taxable income
  • 12%: $19,051 to $77,400
  • 22%: $77,401 to $165,000
  • 24%: $165,001 to $315,000
  • 32%: $315,001 to $400,000
  • 35%: $400,001 to $600,000
  • 37%: over $600,000
  • Standard deduction: $24,000

2018 tax brackets and income ranges for taxpayers filing as head of household
  • 10%: $0 to $13,600 of taxable income
  • 12%: $13,601 to $51,800
  • 22%: $51,801 to $82,500
  • 24%: $82,501 to $157,500
  • 32%: $157,501 to $200,000
  • 35%: $200,001 to $500,000
  • 37%: over $500,000
  • Standard deduction: $18,000

2018 tax brackets and income ranges for married taxpayers filing separately
  • 10%: $0 to $9,525 of taxable income
  • 12%: $9,526 to $38,700
  • 22%: $38,701 to $82,500
  • 24%: $82,501 to $157,500
  • 32%: $157,501 to $200,000
  • 35%: $200,001 to $300,000
  • 37%: over $300,000
  • Standard deduction: $12,000  

If you live in the state of Georgia you can also use the above format to get a peek and see if  you will owe or get a refund on your state taxes. 

For those of you with no state income tax—great, you now have the ability to know your federal outlook or you now have a blueprint that can at least give you an estimate of what you might owe. 

For those in other states you may have to rely on your tax professional or do additional research if you are comfortable working with numbers.

All the best as your lower tax bracket leads you toward greater success...

More on The New Tax Law and how you can benefit...

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

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