Tax Reform and Baby Boomers

Tax Reform and Its Effect on Baby Boomers

tax reform and baby boomersThe new Tax Cuts & Job Act (TCJA) has been a hot topic most of this year, both in social and financial circles. Tax reform will have different effects on many taxpayers in different situations.

Previous articles have discussed how millennials are affected by the TCJA tax reform, and now another group is in the spot light. Baby Boomers it’s now your turn.

To assist you in visualizing just how tax reform will affect various individuals in the baby boomer generation, we’ve provided a Tax Reform Calculator. Check out the different scenarios and create your own to give you an idea where you stand.

As you hear the drum roll in the background, we are about to reveal the parts of the TCJA that will mostly affect baby boomers.

  • The standard deduction has almost doubled
    For each filing status, the new standard deduction has almost doubled. What this means is that many taxpayers who have been itemizing their deductions in the past on a Schedule A will have no need to do it on 2018 taxes.

However, there may be situations where it will be more advantageous to itemize. Some examples such as high mortgage interest, medical expenses, and charitable contributions, to name a few.

You need to remember, however, that Congress has repealed certain types of itemized deductions. Some of these are tax preparation fees, investment expenses, and un-reimbursed employee expenses.

The 4,050.00 personal exemption has also been eliminated, but the increased standard deduction will help to make up the difference for most of the boomers.

  • Tax bracket rates have been adjusted
    Over all, most of the different tax brackets are being taxed at a lower percentage. In addition, the actual tax brackets cover a larger range of income. What this means to you is that you can earn more money without moving up to a higher bracket.

Tax Reform Calculator
Our simple overview illustrated how the tax reform will affect baby boomers in various tax situations, but how will it affect you?

Each of us has our own unique situation and for that reason, our tax reform calculator has been adapted so that you can calculate your 2018 taxes based on the new law. When you visit our Tax Reform Calculator page, you’ll see several scenarios already setup for you to see.

After looking at those, we encourage you to click the one that says Create a Custom Scenario and input your estimated 2018 figures. Use your 2017 tax return as a guide so that you don’t forget anything.

We invite you to leave a comment below if you have any questions or suggestions. We always look forward to comments from our readers and subscribers, and our friends at The Tax Foundation.

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Cynthia K.
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Cynthia K.

That tax reform calculator is really great. The way it gives you a comparison of the savings is my favorite. I was afraid at first, thinking that I may owe some money because of the loss of the personal exemptions, but I don’t. Whew!

Chris W.
Guest
Chris W.

My wife and I have been itemizing our deductions in prior years, but with the increased standard deduction, it looks like we’ll be filing that way this year. Our refund should be about the same based on your calculator. Thanks for an informative post.

Nancy N.
Guest
Nancy N.

In my state, if you don’t itemize deductions on the federal return, you can’t itemize on the state. My state standard deduction is very low, and although my normal itemized deductions will be too low for the federal, would help a lot on the state. This will be a pain in the behind making extra calculations to see which way will be the best.

Jessica B.
Guest
Jessica B.

I did a calculation for 2018 taxes estimating my current income, and that high standard deduction will be giving me over $800 in additional refund. It looks good to me.

Joshua L.
Guest
Joshua L.

My wife and I have four children and three of them are over 17, and while I don’t mind paying my fair share of taxes, I am being penalized because we have children. Losing the dependent exemption will hurt us financially.

Peter V.
Guest
Peter V.

I like most of the provisions of the new tax code except for one item. All of our investments are managed by an asset management group and the annual fees charged are sizable and will not be deductible because the miscellaneous deduction category has been eliminated. This made up most of my itemized deductions and if I use the new standard deduction on my federal return, I won’t be able to itemize on my state.

Howard C.
Guest
Howard C.

I happen to live in one of the states where we have very high real estate taxes, and with the new tax code, the taxes area of Schedule A is capped at a total deduction of $10,000. Between the real estate tax and my state income tax deduction, I was able to deduct over $60,000 in taxes that I paid. This hurts big time.

Kellie O.
Guest
Kellie O.

That’s a cool tax reform calculator. I used it for the first time this morning and it gave me a nice picture and comparison of my 2018 taxes.

Eric R.
Guest
Eric R.

I for one am glad the new tax reform is here. I don’t earn a lot of money compared to many others, but I have more much needed money on pay day. To be sure my withholding was okay, I used your tax calculator and one other one, and I’ll still get a small refund.

Caroline W.
Guest
Caroline W.

I’m wondering if the new tax law will make many other individuals who are interested in buying a home think twice before buying in one of the states that have high real estate taxes? My husband and I had planned on buying in upstate New York, but now have decided not to. It may affect home prices as well for those wanting to sell.