Rent? Own? Single? Children? 4 Case Studies Show How New Tax Law Could Affect You
On Dec. 22, 2017, President Trump signed into law H.R. 1, or The Tax Cuts and Jobs Act (TCJA) -- the first major tax reform since 1986. With 2017's tax season wrapping up, now is a good time for Americans to see how the TCJA will affect their tax situation going forward.
Below is a case study approach to help better understand the TCJA, illustrating how the new law affects different hypothetical clients, and highlighting the most significant changes to the law.
The Basics - Increasing the Standard Deduction and Lowering Tax Rates
Mark White
- Age 30, single, lives in Salt Lake City, Utah
- No children or dependents
- Earns $70,000 per year in salary and has no other income
- He rents and does not itemize his deductions (his standard deduction is greater than his itemized deductions)
| Wages/ Adjusted Gross Income | $70,000 | $70,000 |
| Deductions (Standard) | $6,350 | $12,000 |
| Personal Exemptions | $4,050 (1x) | N/A |
| Taxable Income | $59,600 | $58,000 |
| Federal Tax | $10,645 | $8,700 |
| State Tax (UT) | $3,500 | $3,318 |
| Marginal Tax Bracket (Federal/State) | 25%/5% | 22%/5% |
Bottom line: Mark will save $2,127 in taxes. Why?
