The U.S. Treasury and IRS put out new guidance and withholding tables for employers that incorporate changes from new tax law. Under those new tables, Treasury estimates over 90% of employees who get a paycheck are likely to see an increase in take-home pay as soon as February. Seeing an increase in take-home pay is a nice surprise. But many taxpayers need to assess whether their current withholding is setting enough money aside so you do not pay taxes next year.
The new tax law’s major changes affecting individuals include new tax brackets, lower income tax rates. Other major changes are doubling standard of deductions, eliminating personal exemptions as well as itemized deductions. The idea behind new tax tables was to best approximate workers’ tax liability under new law and deliver benefits as soon as possible.
Make sure to review the number of allowances that are currently on your employers W-4s and adjust as needed. The W-4 form determines amount of income tax withheld from your pay based on criteria such as being married or have children. The more allowances you claim the less tax will be withheld from your pay but if adequate amount is not held you may owe taxes.
The following are income brackets for taxpayers who are single and married filing jointly:
For Single Filers For Married Filing Jointly
10% 0 to $9,525 10% 0 to $19,050
12% $9,525 to $38,700 12% $19,050 to $77,400
22% $38,700 to $82,500 22% $77,400 to $165,000
24% $82,500 to $157,500 24% $165,000 to $315,000
32% $157,500 to $200,000 32% $315,000 to $400,000
35% $200,000 to $500,000 35% $400,000 to $600,000
37% $500,000 and up 37% $600,000 and up