I just got my first paycheck with revised withholding as result of tax reform (Tax Cuts & Jobs Act of 2017). My paycheck is bigger which, on the surface, seems fantastic. Who doesn’t enjoy a bigger paycheck?
However, I’m a little bit worried about how this reduction in tax withholding will play out when I go to file my 2018 taxes. I am not a fan of either big refund checks or making a big payment with the return. The first option (refund) indicates that I gave the government a loan. The second option (payment) suggests that I might be penalized for underpayment.
My solution to this worry is to review my 2018 tax situation as I prepare my 2017 return. As I go through 2017 return prep, I can outline all the changes that may impact me and determine an estimate of the impact. For me, these changes include:
No personal allowance
Potential child tax credit
Increased standard deduction
Limitation on itemized deduction for state tax
Change in tax rate (taxable income brackets)
Since my history may or may not include electronically filing on the last day in a panic at 11pm, I better start earlier this year.