There have been unending arguments back and forth about who the ultimate winners and losers are on the new tax bill. But the answer comes down to the individual types of income on your return, and whether or not there are any new breaks on those types of income.
So there are no overall answers to the question. Only individual ones based on a specific tax case.
That being said, the Wall Street Journal did a study on the tax changes that broke down taxpayers into quintiles. They used an average type of income for each quintile.
In other words, not all W-2 Income, not all overtime, not all Cap Gains, but average, average, average. You get the picture.
They came up with the following.,,
1 – The Lower Quintile or families with incomes below $34,600, receive the highest tax break of 15.1%. Since these earners pay very little in taxes to begin with, that came out to $150 in annual savings.
2 – The Second Quintile receives a tax break of $14.9% which becomes $750 in tax savings.
3 – The Third or Middle Quintile of earners gets a 12.6% break coming to $1,780 in actual savings.
4 – The Fourth Quintile saves $3,460 in taxes or 11.1%.
5 – The way that the Fifth Quintile was broken down is complicated. Depending on where an earner would land inside it, their savings go from 9.2% at the lower end of the quintile to 7.1% at the highest. Those percentages translate into somewhere between $5,440 to $75,410 in annual tax savings.
Let me leave you with this…
I’m not writing this as a sort of political statement or manifesto. Where you land on this argument comes down to your individual political beliefs.
I don’t want to talk about people losing Medicare, Tariffs, or what any of this will do to retirees, immigrants, or the working poor. Nor will I talk about whether this is good or bad for entrepreneurs or the country as a whole.
That’s not what this is about. My point is much simpler than any of that.
Where your taxes land on this depends on your individual circumstances. And because of that, there are plenty of tax planning opportunities not only for you, but also for your companies.
Whenever Washington closes a door, they open three windows. My job is to find those windows and inform my clients so that they can benefit and still be protected.
Again, it all comes down to individual circumstances and planning.
But let’s also realize that this isn’t over by a long shot. At least three other things will be happening that can change even more of this before the end of the year.
1 – They aren’t done writing Federal Tax Law for 2025. They’ll probably make even more changes before the end of the year.
2 – We’re yet to see any of the State Tax Law changes in response. The States are broke. You don’t actually think they’ll just go along with all of this, do you?
3 – We’re yet to hear anything from our friends at the IRS. Just because Congress passes a bill and the President signs it into law, doesn’t mean that the Service will enforce it.
In case you don’t know it, our current administration isn’t very popular at the IRS these days. I can’t wait to see what they either will do or won’t do in reference to any of this. Only time will tell.
Like most tax bills, there’s something in this one for everyone. But the Devil is in the details.
So the sooner we start talking about this and becoming educated, the better off we’ll all be. As further changes are put into place, I’ll keep you informed.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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