Most Americans will get a tax cut next year under the plan Congress passed this week, but figuring out exactly how much your family will save is tricky. Republicans say a typical family of four earning $73,000 per year will see taxes drop by more than $2,000. But circumstances can vary widely depending on factors like income, the number of children or where you live.
As Republicans sent the tax bill to the White House, Marcie George wondered if it would make a difference in her house, reports CBS News correspondent Tony Dokoupil.
“It didn’t seem as they were going along that it would really affect someone like me,” George said.
A single mother who rents a home in Cary, North Carolina, her income last year as an administrative assistant was a little under $40,000.
“Financially, I struggle. I live paycheck-to-paycheck. I make things work. I readjust and rearrange, but I – we do get by,” George said.
So will “getting by” get any easier? We brought her 2016 tax return to Jeffrey Levine, a certified public accountant at Blueprint Wealth Alliance on New York’s Long Island.
“I got good news for you, Marcie. You’re getting more money back next year,” Levine said.
He says she’ll benefit from a doubling of the child tax credit. Based on her returns last year, he estimates a savings of about $1,300 in taxes.
“That would be more that I would be seeing in each paycheck, so, that would be a good thing,” George said.
Amber and Jason Edwards were also hoping for some good news.
“I hope it alleviates pressure on the middle class. Whether it does or not, I don’t know. I guess we’ll find out,” Amber said.
They’re married homeowners with no kids in Providence, Rhode Island. As college educators, they took in more than $150,000 last year as they worked to pay down their student loans.
“Financially we’re, you know, we’re doing OK,” Jason said. “We’re certainly, you know, not at the poverty level or anything of that nature.”
Jason, who blogs about their finances, wanted to know how things would change.
“I actually think they would pay tax on about $12,000 more of income but because of the lower rates, they actually end up saving a little bit of money,” Levine said.
Levine says the couple will switch to the newly-increased “standard deduction” which means a simpler return with no itemized deductions. He thinks they’d owe about $650 less than before.
“Honestly I’m a little surprised because well what you had said – initially you thought we were going to have a higher tax bill,” Amber said. “Right,” Jason replied.
They’re not the only ones. Melissa and Layne Lev also expressed concern about next year’s taxes.
“I’m thinking they’re going to be higher and by how much? I don’t know if I could answer that. I’m just thinking they’re going to be higher,” Melissa said.
Married with three children, they own a home in Fresno, California. They opened a cycle studio last year and Melissa is a pharmaceutical sales rep. Their combined income in 2016 was around $300,000.
“We were doing well enough to take a risk and open up a small business in our town,” Melissa said.
“It’s definitely hard work and definitely a lot of stress when we have, you know, so much of our – so much of our worth on the line, so to speak,” Layne said.
“Layne and Melissa are from California, a very high income tax state so a lot of people are worried, ‘oh my gosh, this is really going to hurt me,'” Levine said. “It actually is really going to help them, though.”
Levine says their itemized deductions, including breaks for state and local taxes, will be much lower. But they’ll no longer be hit with the alternative minimum tax and will now qualify for child tax credits when they didn’t before. Overall, Levine estimates they’ll be responsible for nearly $13,000 less in taxes.
“Well, that’s good,” Melissa said. Layne added, “I like the sound of that. Can I get the accountant’s number after this?”
According to Levine, every one of the families will have more money in their pocket next year.
He did point out his calculations are just estimates and says everything could change again in a few years when many of the new provisions expire.