My 2018 Tax Return
As a do-it-yourself tax preparer, I just finished my 2018 tax return by using TurboTax online. The 2017 Tax Cuts and Jobs Act reduced my federal income taxes little bit.
Impact of 2017 Tax Law
My Adjusted Gross Income has increased by 17% in 2018, compared to 2017.
My W-2 and 1099 income grew up, so this is a good news. But the increase is partly caused by Roth characterization event.
My Taxable Income has increased by whooping 35%. It’s much higher number than AGI due to the 2017 tax law.
Elimination of personal exemption has increased the Taxable Income by $8,100.
Due to new $10,000 cap on SALT (state and local tax) deduction, I went with the standard deduction which is $24,000 for married joint filer. This is clearly a penalty to those living in the states with high income tax and the areas with high property taxes.
My Federal Income Tax increased by 23.7% that is lower than the increase of Taxable Income. Phew, thanks to the new tax brackets.
28% tax bracket has been replaced by 24% bracket with a huge threshold up to $315,000.
Overall, the 2017 law lowered my tax not so significantly.
I calculated that I would have paid about $1,500 more under the old tax law.
I didn’t have to pay AMT in 2018.
But I still had to pay Obamacare surtaxes - Medicare surtax and Net Investment Income Tax. I wished them to be eliminated for the sake of simpler tax return.
There will be no more tax benefit from my mortgage interest as long as I cannot itemize deductions. I should pay off my mortgage sooner than later.
I will stop doing Roth conversion of pre-tax money until my marginal tax rate goes down into 10% bracket (after retirement).
I should minimize taxable 1099-INT income. Instead of keeping money for short-term use in the CD or saving, I will leverage the muni bond funds that are tax-exempt.
Tax return is simpler! Look at the new 1040 form. Now more people should be able to do this DIY, with aid from tax softwares that is getting cheaper due to competition.
For 2019 tax return, I will consider switching to Credit Karma’s tax service that is completely free of charge. I hesitated to try them given they are new and my tax situation is not so simple. But after reviewing the simplified tax return, I would definitely try them next year.