‘False tax relief’
Dear editor:
I am not a professional tax preparer and I do not have access to professional-grade software. I am a senior citizen with a 10-key adding machine. The following is an analysis of the tax a couple with two children filing as Married Filing Jointly (MFJ) with an Adjusted Gross Income (AGI) of $50,944 would pay in 2018 under the current tax code and under the Republican proposed Tax Reform Act.
Filing under the current tax code in
2018 (*adjusted for inflation according to the Tax Foundation) the filers’ AGI of
$50,944 would be reduced by a standard deduction of $13,000* and four personal exemptions of $4,150*, resulting in a taxable amount of $21,344. Of that, $19,050 would be taxed at 10 percent, equal to $1,905, and the remainder, $2,294 at 15 percent, equal to $344, resulting in a tax of $2,249. The filers would then deduct the child tax credit of $1,000 for each child from the $2,249 tax, leaving a tax due of $249. Under current tax law, if the child tax credit exceeded the tax due, resulting in a credit in tax due, the result would be a zero tax due and the excess credit would go away. Child tax credits under the current tax regulations are nonrefundable.
Filing under the Tax Reform Act, the filers’ $50,944 AGI would be reduced by the standard deduction of $24,000, resulting in a taxable income of $26,944. Of that, $19,050 would be taxed at 10 percent, equal to $1,905, and the remainder, $7,894 at 12 percent, equal to $947, resulting in a tax of $2,852. The filers would then deduct the child tax credit of $2,000 for each child from the $2,852 tax, leaving a credit of ($1,148), which would be refunded to the taxpayer. Under the Tax Reform Act, $1,400 of each child credit is refundable.
In summary, in 2018, the tax filers in the above example would avoid the $249 tax due under the current tax code and would receive a check from the IRS for $1,148 under the Tax Reform Act. The result for the taxpayers would be $1,397 of “false tax relief.”
In addition, the taxpayers would be able to file on a post card, thereby avoiding the expense of a professional tax preparer. Merry Christmas, Larry Bailey Hot Springs