A new tax law went into effect this tax season that lowers tax rates in most brackets, doubles the standard deduction, and overhauls many old tax rules. These reforms made headlines over the past year, but many Americans may remain uninformed about how the new tax rules could affect them.
In a recent survey about how Americans approached their taxes this year, 37% of people felt they were not at all informed about the 2018 Tax Reform. An additional 43% stated they were only slightly informed.
Despite the U.S. Government Accountability Office’s (GAO) warning that taxpayers should reassess their 2018 withholdings, only 15% of Americans said they had changed their 2018 withholdings.
Nevertheless, a majority of people of all generations still think that their tax refunds will be about the same as last year.
How are Americans planning to use their tax refund money? From paying off debt to saving money or going on a vacation, the answer varies depending on who you ask.
42% of women and 40% of men of all generations stated they would use their refunds to pay off debt. An additional 27% of women and 24% of men said they would sock the money away into a savings account.
42% of women and 40% of men of all generations stated they would use their refunds to pay off debt.
While a majority of respondents stated that they would use their refund to pay off debt, 42% of people said that they have about the same amount of credit card debt this year as they did last year. A combined 54% stated that they would find it difficult (32%) or very difficult (22%) to pay for an unexpected $500 expense.
No matter how they plan to use their money, many Americans see tax refunds as a much-needed cash infusion that will help them manage their finances. If you haven’t had a chance to file your taxes yet, here is an overview of some of the biggest changes happening this tax season:
- The standard deduction, also known as the amount of income that is not subject to income tax, has increased this year. For single filers, it is now $12,000. For joint filers, it is $24,000. For the head of the household, it is $18,000.
- Many itemized deductions have been suspended this year, including investment expenses, alimony deductions, personal casualty and theft losses, and mortgage interest deductions.
- Personal exemptions, or the amount you can deduct for yourself and your dependents, have been eliminated.
- Tax rates have changed as much as 4% in each tax bracket.