In my original article covering the Tax Cuts and Jobs Act (TCJA), I predicted the bill “will benefit most Americans.” I was so spot on with this prediction that even my ex-wife said I was right.
According to NPR and the Tax Foundation 80% of filers got a tax cut from the overhaul and 5% of filers saw their taxes increase. Most of the 5% who paid more are “high earners” who live in states with steep state and local taxes. This means that 15% of filers paid about the same amount before the TCJA went into effect.
The outrage over the TCJA came from early filers, who were on average receiving $170 (or 8%) less in their tax return from the year before. You might have seen this outrage on social media with hashtags that were trending; #GOPTaxScam and #GOPTaxScamStories.
The issue with this outrage is twofold. First, early filers whose returns were processed before February 8th were on average seeing a smaller tax return. However, as of March 1st the average refund has increased by $22.00 or 0.7%. Secondly, a tax refund is not representative of what you paid in taxes, it represents what you OVERPAID in taxes.
Tax refunds are what the government owes you because you ended up paying too much; it is not a gift from the government, but just a return of your already earned money. If you’ve ever heard the phrase “a tax refund is just an interest free loan to the government,” it is entirely true. Most filers saw the benefits from the TCJA early in 2018, in their paychecks, with an average annual tax break of around $1,400.00.
If you’re like me you’re still unhappy with the amount you paid in taxes, even if you saw a benefit from the TCJA. The good news is, we can help. If you’re a W2 employee or a business owner, you can see how we have been able to utilize Section 125 of the IRS code to reduce FICA and payroll taxes for businesses, increase employee benefits all while having no effect on eligible W2 employees net pay. You can see my article on this strategy here.
If you’re a business owner that operates your business using a pass through, or flow through entity, we may be able to give you a 6-figure deduction and a 20% break on all earned income for 2018. This may require you to file an extension, but it’s still possible to do this for 2018. My article for this strategy can be seen here.
And if you’re involved in a 1031 exchange, which under the TCJA now only applies to real estate, we can add some flexibility to the process by using a Delaware Statutory Trust (DST). You can read about this strategy here.
If you have any outstanding questions or concerns, you can contact our office through our website here or reach me through my contact info listed below. We are happy to offer a complimentary review and/or see if any of the above strategies may benefit you.
Co-Founder, Finance For Thought
Data Source: Tax Cuts and Jobs Act