Saturday, December 1, 2018

Families Benefit from Tax Plan

I was playing around with some numbers on the new drafted tax forms from the IRS for this coming tax season of 2018.  It is pretty amazing how great Trump's new tax plan from last year is for families.  It is especially great for families with more than 3 kids but those with 2 kids will also find great savings.

For the typical family of 4, that includes 2 children, you actually will pay NO federal tax at all until your household income reaches $60K.  Then, for every $5K after that, you will pay on average $600 or 12% as shown below.  However, if you go into the next tax bracket past $78,950, your tax increases to 22%.

2-dependent child tax credit households making:

$60,000 and below = NO federal income tax owed
$65,000 = $600
$70,000 = $1200
$75,000 = $1800

If you have a 3rd child, you may even qualify for an additional child tax credit, which means the government will actually PAY you for having that child despite you not paying a dime in federal income tax.  Some may say that isn't fair but it is!  By having children, you are helping the government by adding another taxpayer.  It is great the government is finally giving back - oh, thanks to Marco Rubio who added this child tax credit increase at the last minute before the bill passed.

It isn't all roses, even though you may not pay federal income tax, you still must pay about 13% in other taxes:

  • Social Security tax - 6.2% of income
  • Medicare tax - 1.45% of income
  • State Income Tax - Ohio's is 2.6% on most families
  • City Income Tax - if you live in a state that taxes the city you work in, you pay up to 2.5% of income
  • School Tax - again, if you live in a district that taxes you, you pay average of 1% of income tax


So for a family making close to $60K - you may pay upwards of $7,800 in other income taxes.


*Averages are based upon a typical one income earner, married filing jointly, with W2 wages only and no contributions to HSA, retirement, etc.  Calculation short list: Income - $24,000 standard deduction = taxable income; tax - child tax credits of $4,000 for 2 children = 0 tax owed

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