Your paycheck may be going up soon because of tax cuts

Your paycheck may be going up soon because of tax cuts

January 28th, 2018 by MARCY GORDON in Business Around the Region
For more articles about personal finance see the 2018 Your Money Guide page

WASHINGTON — Millions of working Americans should start seeing fatter paychecks as early as February, the IRS says, as a result of the recently passed tax law.

But the precise timing hasn't been fixed yet. And some employees should be aware that less money withheld doesn't necessarily mean that their tax burden will shrink next year.

The massive Republican tax legislation, signed into law last month by President Donald Trump, kicked in Jan. 1. Billed as a huge benefit for the stressed middle class, it brings the biggest overhaul of the U.S. tax code in three decades, reaching into every corner of American society and the economy. The $1.5 trillion package provides generous tax cuts for corporations and the wealthiest Americans, and more modest reductions for middle- and low-income individuals and families.

A look at how working taxpayers could be affected:

WHAT ABOUT THOSE FATTER PAYCHECKS?

That was the promise from the Republican architects of the tax plan. They insisted Americans will come to love the new tax law when they see their heftier paychecks this year — with less money withheld in anticipation of lower income taxes.

"In February, look at your paychecks, because you'll see the tax relief we delivered," said Rep. Kevin Brady, head of the tax-writing House Ways and Means Committee.

The IRS has yet to issue the new withholding tables for employers, reflecting the changes in tax rates for different income levels under the new law. That's expected to happen sometime this month to give companies and payroll service providers — and their computer systems — time to adjust.

In the meantime, the pre-Jan. 1 tax rates and withholding amounts will continue to apply.

DON'T ASSUME

The tax cuts for corporations under the new law are permanent, while those for individuals and families expire in 2026.

Nonpartisan tax experts project that the law will bring lower taxes for the great majority of Americans, though not all.

But reduced tax rates don't necessarily mean a lower tax bill for 2018. The new law is complicated. There are significant limitations on long-cherished deductions, such as the federal deduction for state income, property and sales taxes. There are new tax credits but other mainstays — like the $4,050 personal exemption — are gone. The standard deduction is doubled, to $24,000 for couples, but that means it no longer makes sense for many people to itemize and claim other deductions.

NEXT YEAR'S RECKONING

Taxpayers won't file their 2018 returns until next year, in accordance with normal procedure. That's too late for taxpayers to have refunds in hand, or checks paid to the IRS, under the new law before they vote in the midterm elections this November. Trump and the Republicans are counting on the tax law to give them a boost in the elections.


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