By now you have perhaps been hearing stories about how the highly touted Trump tax cut isn’t working so great for some in the middle class.
Tax season is off to a slower start this year, with early filers seeing smaller average refunds. The average refund is down about 8% under the first full year of the overhauled tax code, according to data released by the IRS on Friday. Refunds averaged $1,865 compared to $2,035 for tax year 2017.Per CNN
I was working on a tax return recently for someone who is retired and their return was pretty much the same as the prior year, except that they owed nearly a thousand bucks more than the prior year. It didn’t take me long to see that it was the simple fact that exemptions are now gone, disappeared by the new tax law. Because this client itemized their deductions, the new increase in the standard deduction didn’t offset the fact that they lost the eight thousand bucks in exemptions. The end result was that they owed more than last year.
Eliminating the exemptions and raising the standard deduction is one of several ways in which this so-called “tax reform” merely reshuffles the deck. Another example is how the tax return itself is now “simplified.” (“It’s now the size of a postcard!”) Yet we now have six new schedules that didn’t exist last year.