How The 2018 Tax Cut Is Not A Tax Cut For Cubicle Warriors

How the 2018 Tax Cut is not a tax cut for Cubicle WarriorsThis is not your ordinary career site. I help the corporate worker who toils away in the company cubicle make career transitions. You want to do your job well, following all the rules -- .The career transitions where I can help you center on three critical career areas: How to land a job, succeed in a job, and build employment security.Top 10 Posts on CategoriesWhen the Republicans passed their tax cut at the end of 2017, the Republicans proclaimed it was a (windfall) tax cut for corporations and a (small) tax cut for individuals. Well, it is a windfall for corporations.  For families? It depends. For Cubicle Warriors? It’s probably a tax increase.If you were curious, you might have checked your paycheck like I did when the law kicked in. I was happy â€" my take home pay went up about $130 per paycheck. Tax cut? Awesome.But then I started reading about people who ran their paycheck numbers through an IRS withholding calcula tor and reported surprises.So this weekend, I did too. And, boy, did I get a surprise.One of the big changes in the tax law is that it caps the deduction for state and property taxes to $10,000. Anything above that is now taxable at the Federal level.So what happened is my company reduced my withholding amount from my paycheck â€" hey, there was a tax cut so withholding should go down â€" but they don’t account for the state and property tax cap in what they withhold.If you live in a higher state income tax and property tax state,, such as New York, California, New Jersey â€" Wisconsin is one of them where we have higher taxes, but great services â€" you hit the $10,000 cap pretty quickly. I get close with property taxes and then the state taxes are like no longer deductible.After looking at my YTD withholding, the amount withheld per paycheck, my 401(k) contributions, HSA/FSA contributions, and my bonus check, the IRS Calculator said I needed to have zero deductions (I do) plus w ithhold another $250  per paycheck in order to get to even on my Federal return next year.Oh, and my spouse needs to withhold about another $130  per paycheck from her pay as well in order for us to break even. This is the first time in my entire career where I’ve had to withhold more dollars than my normal zero deductions on my W-4.The combination of reduced withholding in my paycheck and not accounting for the state and property tax cap means I would have ended up with a huge shortfall come tax season in 2019.If you, and especially if your spouse, both work in cubicles, the chances are you’ll hit these maximum thresholds.Many of you, perhaps, have accountants doing your tax returns. If you have a really good accountant, they should have looked at this for you and made some recommendations. But I do my own, so I wasn’t prompted to check until I read some of the articles about this.This is not rare, especially if you live in a higher state and property tax state. Anecdotally, everyone I spoke to today about this who had done the calculation (or their accountant did) had to significantly up the amount they were withholding.So don’t get surprised in 2019. Get surprised in 2018 while you can still make up a difference or have confidence that you won’t have to worry. Work the IRS Withholding Calculator. Then take actions you need to take on your W-4.I changed my withholding today.This is not your ordinary career site. I help the corporate worker who toils away in the company cubicle make career transitions. You want to do your job well, following all the rules â€" .The career transitions where I can help you center on three critical career areas: How to land a job, succeed in a job, and build employment security. policiesThe content on this website is my opinion and will probably not reflect the views of my various employers.Apple, the Apple logo, iPad, Apple Watch and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. I’m a big fan.Copyright 2020 LLC, all rights reserved.