Your paycheck is about to change, thanks to the new tax billed passed by a Republican Congress and signed into law by President Donald Trump in late December.
The first set of new guidelines from the IRS has been delivered to employers and payroll processors.
The guidelines outline how much tax should be withheld from your paycheck.
According to Yahoo Finance, the results look pretty good for everyone, at least initially.
The IRS released new guidelines for employers’ and payroll processors’ calculation of your tax withholding on each paycheck, and the results look pretty good for everyone, at least initially
The financial news organization analyzed 11 income categories, and found a net drop in tax withheld from paychecks in each of those 11 categories.
That translates into a net increase in take-home pay with each paycheck, for each of those 11 categories.
For individuals that earn near the national median income, which is close to $60,000 annually, that means an additional $112 per month in your pocket.
That equates to an extra $1,344 each year, before taxes are filed.
Yahoo Finance’s examination of the numbers showed an expected net increase in take-home pay for married workers that are paid twice each month, from 2017 to 2018, across the board for annual incomes ranging from $10,000 to $1 million.
But that might not necessarily stand when end-of-year filings are made.
‘It’s important to note that the increase in net pay that shows up on all 2018 paychecks won’t necessarily be the same thing as the total change in a worker’s tax bill for 2018,’ Rick Newman wrote in the column.
Things that may also affect your final tax liability include pre-tax deductions taken from your annual income (which mean less tax paid overall),
President Donald Trump signed the new tax bill into law on December 22, with no Democrats voting yes on the measure in either the House or the Senate; Only 12 Republicans voted no on the bill in the House, and only 1 Republican Senator abstained from voting at all
The changes to the withholding tables are what will affect Americans immediately, and with lower withholding throughout the year for most income brackets, that will put more money in your pocket to start with.
But other changes, which will come into play at filing time, will have a negative impact on the total tax bill for some.
For instance, the standard deduction has been doubled, but the personal exemption has been dropped.
‘For families with fewer than three dependent kids, that’s probably a net gain,’ Newman said.
‘But for larger families it could push up their taxable income and their total tax bill.’
Deductions for state and local taxes are also now capped at $10,000, which is a pretty big change for those in higher income brackets that pay state tax on that income, and for those with high state and local property or school taxes.
Other changes to the tax law will mean a bigger final tax bill for 2018 for some
These kinds of deductions aren’t factored into what your employer automatically withholds from your paycheck.
It’s possible these new default withholding amounts may leave some underpaying, with a tax bill to even things out when they file for the 2018 year.
Individuals can still ask their employers to withhold more taxes from each paycheck if they like, if that’s a concern for them.
You can expect these changes to start being implemented in payroll processing by mid-February, and showing up in your paychecks within weeks.
This new tax overhaul passed the Senate with a vote of 51-48, with all yes votes coming from Republicans.
Sen. John McCain of Arizona is the only Senate Republican who did not vote for the bill, because he abstained from voting at all.
Every Senate Democrat voted no.
The bill passed the House with a vote of 227-203, again with all yes votes coming from Republicans.
No votes came from 12 Republicans and 191 Democrats, with two Democrats abstaining from the vote.
Trump signed the tax bill into law on December 22.