Why your taxes went up
Many of us are still pondering why we didn’t benefit from the alleged tax cut and worrying about what will happen this year, again. After all, tax brackets went down 3-4% for the first 4 tax brackets. But (and this continues this year) your taxable income most likely went up. Don’t expect that to improve for 2019. At a recent conference I attended, this was much discussed. Why?
You live in a blue state. Clever how that worked, huh? Because in many blue states and urban areas, your property taxes on a middle-class home probably exceeded the $10K cap. Add in your state income tax paid. And don’t forget that mortgage interest you used to itemize. With just these three, there’s a good chance you could exceed the $24K standard deduction (married filing jointly) or $12,000 (single). These increase to $24,400/$12,200 for 2019. Woohoo. But once income tax and property tax are capped at $10K total, your mortgage interest might not put you over the standard deduction.
Your charitable deductions don’t count. If you don’t itemize, you don’t get to take a charitable deduction.
You can’t deduct employee expenses. If you buy supplies, or uniforms (except for teachers), that’s on your dime, now.
You don’t have kids. People with kids saw the tax credit doubled.
For 2019, your medical deductions might not qualify. For 2017 and 2018, you needed medical expenses greater than 7.5% of your income. For 2019, it goes back up to 10% of adjusted gross.
Changes to alimony. Alimony is no longer deductible to the person who pays, beginning with divorces finalized in 2019. The recipient will no longer be taxed on the alimony, but this is likely to result in lower payments to the recipient (since the payer will be dinged for more).
There’s not a whole lot to be done, except by voting. However, it’s important to remember that lower taxes are not the only consideration—what you get for them is also important. It’s how much spendable income actually ends up in your pocket. If you didn’t have to pay for healthcare, long term care, could look forward to a decent guaranteed income in retirement, and didn’t have to save or pay for college or vocational training, but had to pay, say, 5% higher taxes, you’d most likely be better off. It’s the value you get, not just the taxes you pay. I discussed this quite extensively in this post, and what exactly we get compared to other Western Democracies here.
