Federal tax cut showing up in paychecks already
SAN JOSE, Calif. (KGO) -- Six weeks ago, President Donald Trump signed the tax reform bill into law. And on Friday, many of us started to see the first effects. They include larger paychecks for the majority of Americans. But will we actually get to keep the extra money? We spoke with a tax expert to find out.
So just how much bigger are paychecks getting? We asked San Jose resident Laura Low as she was pushing a stroller with son Johnny near Plaza de Cesar Chavez.
"Maybe $70, I don't know," she said. "We'll see, right?"
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The IRS is saying married workers making between $51,000 and $167,000 might see an increase of $30 to $172 per paycheck.
"You know, I may get an increase in my paycheck," said Peggy Graham, "but I have no idea how it'll affect my taxes at the end of the year. I don't expect it to be helpful that way."
So we turned to a tax expert Professor Annette Nellen at San Jose State's accounting and finance program. She says everyone is different but gave one example.
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"Roughly if they were married under $120,000 of income, their children are under the age of 17, and they've always claimed the standard deduction before, they're certainly going to see a tax cut," she said.
The IRS has provided employers with new withholding tables, which must be implemented by mid-February. But California taxpayers, especially high earners in business and technology, might need to adjust their withholding so enough taxes will be deducted.
The reasons include the repeal of personal exemptions, limits for some itemized deductions, and changes in tax credits.
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Doing it on your own might be challenging for the moment. While the withholding tables are posted online, the IRS has not yet posted the W-4 form for 2018 to make changes in withholding. An online calculator to allow taxpayers to crunch their withholding is not expected to be available until the end of February.
Even checking if the tax cut has boosted your pay might take work for people like Jay Chambers who's enrolled in direct deposit.
"I think it probably just deposited today, my paycheck," Chambers said. "I haven't looked yet."
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Also keep in mind that many homeowners could see their tax liability increase.
"That increase will be due to their loss of deductions, such as in California, high-income individuals losing their state tax deduction and property tax total of $10,000," Nellen said. "That can be a significant amount for some folks.">
Overall, though, Professor Nellen says about 80 percent of taxpayers should see some increase in their paychecks. And it will help to to pay down debt, to make purchases, or to boost savings.
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