How Will Tax Changes Affect Upper Middle Class?
How Will Tax Changes Affect Upper Middle Class?
The 2019 tax season is almost here. It officially starts next week. And the Tax Cut and Jobs Act figures to play a huge role in how this year’s tax season plays out. With so many changes, there are sure to be many questions and surprises for both taxpayers and tax preparers. So how will these changes affect the upper class tax bracket tax plan affects middle class? In other words, if you made $125,000 in 2018, what can you expect for you’re your tax return? And what things do you need to consider when filing your taxes to get the greatest return?
Know Your Situation
As with any tax situation, there is no one-size-fits-all answer. Everyone has his or her own unique set of circumstances, so make sure you understand your personal situation before making your tax decisions. That’s because for those who made $125, which is essentially twice the amount of the median household income, the net tax savings could vary greatly, depending on your circumstances.
Child Tax Credit Goes Up; Personal Exemption Goes Away
The new tax reform does provide a major boost for families with children via the Child Tax Credit, which was doubled. However, the personal exemption is now gone, meaning the deduction could be less than normal for larger families. The standard deduction also increased, to $24,000 for married couples and to $12,000 for single filers. So how those factors play out will depend on your specific situation. For a typical family of four, the news could be good.
New Tax Rate to Lower Overall Bill
For example, for a family of four with both parents working and earning a combined $125,000, the tax savings could be slightly more than $4,000 for 2018 compared to 2019, assuming they don’t itemize. Their taxable income would actually go up, but the lower tax breaks for the upper middle class rate would decrease their bill. A single person with the same income would save about $3,600 in 2018 compared to 2017. However, that person’s taxable amount would be more than double that of the family of four.
Itemizing Will Play Key Factor
But the biggest factor probably comes down to whether or not you itemize your deductions. If you previously itemized but the new standard deduction is higher than your itemized deductions then you come out equal or ahead. However, if your itemized deductions were higher than the new standard deduction amount, then you will not receive any benefit from the new higher standard deduction rate.
State and Local Income Taxes Hurt in High-Tax States
In particular, those who deducted state and local income taxes as part of their itemized deductions could take a big hit this year. That’s because the Tax Cut and Jobs Act have put a cap of $10,000 on those deductions.
For many taxpayers that live in high-tax states, that could cause a significant increase in their tax bill. While it appears that most people in the upper-middle class tax bracket will see some tax savings, it will depend on each family or individual’s personal circumstances. That’s why it’s always a good move to speak with a professional tax preparation firm for help.
We hope you found this article about “How Will Tax Changes Affect Upper Middle Class?” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
To receive our free newsletter, contact us here.
Subscribe to our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Impact Venture Capital & GROCO’s “Venture Vision” Seminar 2 of 6 (To register FREE, click here.) This free online instructional seminar on January 11, 2023, at 10 AM is an excellent opportunity to learn more about the risks and rewards associated with venture capital (VC) investments. By covering topics such as the stages of funding,…
Introduction: In this interview, Alan Olsen, CPA and featured guest Bill Gombert discuss comprehensive financial planning and much more. Transcript: Alan Olsen Hi, this is Alan Olsen and welcome to American Dreams. My guest today is Bill Gombert. Bill, welcome to today’s show. Bill Gombert Thank you very much pleasure to be here. Alan Olsen So, Bill, you’re…
Introduction: In this interview, Alan Olsen, CPA and featured guest Brett Kaufman discuss Building Conscious Communities and much more. This Transcript of Alan and Brett’s discussion of conscious community building has been generated by software and may have inaccuracies: Alan Olsen So Brett in our segments here in American Dreams, we talked about pathways of life and things…
Insights Into Venture Capital Investing From Seminar 1 of 6 (To register for seminar 2 of 6 FREE, click here.) “In an era where financial landscapes are constantly being reshaped, it’s crucial for investors to stay ahead of the curve. The Venture Vision Webinar, a joint initiative by GROCO and Impact Venture Capital, recently hosted…