![]() ![]() That alone would save you $400, even without taking into account any other changes. If you earned $320,000 in 2018 and will earn the same amount this year, then in 2019 an additional $5,000 in income will fall in the 24% bracket instead of the 32% bracket. If your income is near the top or bottom of a bracket, you'll see a slightly bigger change. You'd pay about $55 less in taxes thanks to the changes. This would make your new tax bill $4,364. If you earn $40,000 again in 2019, then the extra $400 deduction means your new taxable income for 2019 will be $39,600 - the first $19,400 of which is taxed at 10%, and the remainder of which is taxed at 12%. It's increasing from $12,000 to $12,200 for individuals, from $18,000 to $18,350 for heads of household, and from $24,000 to $24,400 for married couples. The standard deduction is the amount you can deduct from your taxes if you don't itemize. There's also another change that will likely affect you: a change in the standard deduction. The remainder of your income, then, is still taxed in the 12% bracket. In 2019, on the other hand, $19,400 of your income will be taxed at 10%, not $19,050. You'd have been taxed 10% on your first $19,050 in income and 12% on the rest, leaving you with a total tax bill of $4,419 in 2018. You'd have been right in the middle of the 12% tax bracket. ![]() ![]() Say you had taxable income of $40,000 in 2018 and filed as married filing jointly. Let's look at an example to see how this works. These small changes in the tax brackets won't have much of an impact on you, as only small amounts of your income will be taxed at different rates. The highest tax rate you pay is called your "marginal tax rate," because it applies to each additional dollar in income. If you earn more money and find yourself in a higher tax bracket, you will not pay the higher tax rate on all of your income - only on the income in that bracket. Remember that the tax rates above only apply to the income in the corresponding brackets. How do these tax bracket changes affect you? There were no big changes, but the income ranges for each tax bracket went up slightly. ![]()
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