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Doing taxes is never fun.
Just ask anyone who has to file their taxes (even the tax professionals are happy when the season is over).
2018 marked unprecedented changes in the tax code. This was the largest overhaul in over 20 years.
The goal was to simplify the tax code and get more money back in the hands of the average taxpayers.
While the prudent thing to do was to use a tax calculator to see how the 2018 tax code changes would affect your personal situation. Many people didn’t, but happily enjoyed more money in their paycheck (since less taxes were withheld).
Honestly, the end results are mixed. From what I have seen in our personal situation and those around me, I don’t know if they reached their goal. The media is reporting IRS tax refunds are down 8-16%. However, the tax season isn’t over, so that number will fluctuate until most of the tax returns have been filed.
If your tax return is smaller than anticipated, you will learn 10 ways to overcome it.
Biggest Tax Changes in 2018
So, the biggest tax changes were meant to simplify the tax code. But, the question still remains…how will it affect you?
This is just a highlight of the biggest tax changes in the tax code for 2018. Find an extensive list of all the changes.
Lower Number of Tax Brackets
The number of tax brackets were modified from 7 down to 5.
|2018 marginal tax rate||Single (S) and Married|
Filing Separately (MFS)
|Married Filing Jointly||Head of Household|
|37%||Over $500,000 (S)|
Over $300,000 (MFS)
|Over $600,000||Over $500,000|
|2017 marginal tax rate||Single||Married Filing Separately||Married Filing Jointly||Head of Household|
|39.6%||Over $418,400||Over $235,350||Over $470,700||Over $444,550|
In an effort to make taxes easier for the average person to file their taxes, the tax code plan was to streamline the deduction rate.
The standard deduction was increased to $24,000, which was significantly higher than before.
What many people are learning is that now they are unable to itemize deductions they are used to. For instance, the threshold is too high to itemize for mortgage interest deductions (which is now capped at $10K) and charitable donations.
Thus, it makes itemizing deductions irrelevant for millions of Americans.
Self Employed & Small Businesses
The changes were extensive for anyone running a small business or self employed. Plus all of the changes were the last things for the IRS to figure out.
It is imperative to stay up to date on all of the information. Here are tax tips for self employed.
Why A Smaller Tax Refund?
There are so many pieces that go into filing your taxes that is hard to pin point it down to one thing.
Above are all reasons for a smaller tax refund.
A positive reason for a smaller tax refund is an increase in your income. Also known as, you have to pay more in taxes, too.
Many times a small $100 increase in your paycheck will push you over into the next tax bracket.
Regardless of all of that… if your tax return is smaller than anticipated, here are 10 ways to overcome it.