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How to Properly Fill Out a W-4

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You and a co-worker earn the same amount, contribute the same percentage to a 401(k), but someone she’s getting more deposited into her bank account? What gives? The answer lies in one of the many pieces of paper you filled out during the first day on the job: the W-4.

What is a W-4?

When you start working for a company, they have to determine how much of your paycheck to withhold for taxes. While the company has basic tax withholding guidelines they need to abide by, paychecks can be customized to employee’s situations. This done by filling fill out a W-4 form. Your HR department keeps this IRS form on file, and uses it as a guideline on how much to withhold and send to the IRS every payroll period.

Sounds simple enough, what can go wrong?

The main culprit is caused by not claiming enough, or too many, dependents. On the form, you can state how many people in your household depend on your income (in tax language, a “dependent”). If you are married and have two kids, then this number would be four. You can then advise HR that you want to claim four dependents. In doing this, you will receive a larger paycheck so you can support your family. However, in selecting a larger number, you may not be having enough taxes withheld, which will lead to you owing money with your tax return in the Spring.

The opposite is also true. For those people who do not have anyone to claim as a dependent or do not want to owe taxes, they claim zero dependents and receive a smaller paycheck. In doing this, their tax bill in the spring is minimal, or they even receive a refund. In some cases, this refund can be thousands of dollars.

Why wouldn’t you want a big tax return?

Getting unexpected money is great. Even if it’s expected, not knowing the amount can be a great surprise. But the thing that gets overlooked when discussing tax refunds, is that this money was yours all along. By overpaying in your taxes – by not claiming enough dependents – you have been loaning money to the government, and they pay it back to you in the spring – with no interest included. It’s like putting extra money in an investment that pays 0% interest; with the only time you can draw it out being in the spring when you file your taxes.

For some, it can be forced savings to receive that money in a lump sum versus spread out over the year. They then put that money into their investments or savings account, and don’t have to worry about monthly savings. However, they miss out on investment growth over the entire year. For the most part, it’s not a good strategy to get a big tax refund at the end of the year. 

So how should I file, or revise, my W-4?

Every situation is unique. You’ll want to look at your last year’s tax return, and how much money you are making compared to last year. If you are making a similar amount, then this is an easy exercise. See how much you received in a refund / amount owed divide that by 12. Then approach HR and ask them to withhold, or give you, this amount every paycheck (if you get paid monthly).

For example, let’s say that Andrea earns $50,000 as a medical resident but owed $1,200 in tax payments when she filed her taxes. She should go to HR and ask them to withhold an extra $100/month from her paycheck, and then her liability at tax time would be minimal.

For another example, let’s say Chelsea got a raise at work and then be conservative until she goes through her first tax season with her new income. Let’s say she went from $37,500 to $55,000 in her promotion. As a single individual in Nevada, she doesn’t have to worry about state income taxes, but she did jump from the 15% to the 25% Federal tax bracket. She should be asking HR to withhold 25% of her increased pay, not 15% in order to adequately cover her increased liability. She may find that this will be too much come tax time, but she’ll receive a small refund. It will also allow her to fine-tune her withholding for the following year.

There’s nothing worse than getting a promotion and then paying taxes in the spring to remind you that you got paid more!

Confused? Here’s where to find help

It can be tricky, especially when your situation changes, to understand what numbers to use. The IRS understands this, and wants your situation to be accurate, so they have provided a calculator: https://apps.irs.gov/app/withholdingcalculator/. While it is quite detailed, it will give you an accurate estimate of whether you will be owe money, or receive a refund.

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Best Cash Back Credit Cards for Gas – July 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

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Gas in car_lg

Whether you’re hit by high gas prices in your area or you’re a heavy commuter, finding a credit card that offers a high rewards rate on gas purchases will definitely come in handy. There are cards that can earn you up to 5% cash back on eligible gas purchases, which can take the sting out of a stop to top off the tank.

Here are our top picks for gas credit cards.

Platinum Visa® from Abound Credit Union

Platinum Visa® from Abound Credit Union

Platinum Visa® from Abound Credit Union

Regular Purchase APR
10.75% - 18.00% Variable
Annual fee
$0
Rewards Rate
Unlimited 5% cash rewards for gas and 1% cash rewards for other eligible purchases.

The Platinum Visa® from Abound Credit Union lets you earn unlimited 5% cash rewards for gas and 1% cash rewards for other eligible purchases. This is a great rate that can earn you significant rewards. There is also no annual fee. Since Fort Knox is a credit union, you will have to join in order to obtain this card. Anyone can join for $15, of which $5 represents one share in the credit union; the remaining $10 covers your one-time membership fee. This card is great for big spenders in gas who don’t mind working with a credit union.

Sams Club® Mastercard®

Sams Club® Mastercard®

Sams Club® Mastercard®

Regular Purchase APR
16.90% or 24.90% Variable
Annual fee
$0
Rewards Rate
Earn 5% cash back on eligible gas worldwide, including gas at Sam's Club (on the first $6,000 per year, then 1% after). Earn 3% cash back on dining and travel. Earn 1% cash back on other purchases at Sam's Club and wherever Mastercard is accepted.

The Sams Club® Mastercard® lets you earn 5% cash back on eligible gas worldwide, including gas at Sam's Club (on the first $6,000 per year, then 1% after). Earn 3% cash back on dining and travel. Earn 1% cash back on other purchases at Sam's Club and wherever Mastercard is accepted. Earn a $45 statement credit when you open a new account and spend $45 online today. Offer expires June 15, 2020. You need to be a Sam’s Club member to have this card, and annual memberships start at $45. Qualifying gas purchases include spending at gas stations, Sam’s Club fuel stations and Walmart fuel stations located in the U.S. and Puerto Rico; however, there are exclusions: Purchases at fuel stations at wholesale clubs (other than Sam’s Club), certain supercenters and supermarkets won’t earn 5%. Instead, they’ll earn 1%. Take note that the cash back redemption is limited to an annual check mailed out in February. You then have to go to a Sam’s Club to redeem your check.

Costco Anywhere Visa® Card by Citi

Costco Anywhere Visa® Card by Citi

The information related to Costco Anywhere Visa® Card by Citi has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Costco Anywhere Visa® Card by Citi

Regular Purchase APR
15.24% (Variable)
Annual fee
$0
Rewards Rate
4% cash back on eligible gas for the first $7,000 per year and then 1% thereafter, 3% on restaurants & travel, 2% at Costco & Costco.com, 1% on all other purchases

The Costco Anywhere Visa® Card by Citi offers 4% cash back on eligible gas for the first $7,000 per year and then 1% thereafter, 3% on restaurants & travel, 2% at Costco & Costco.com, 1% on all other purchases. Most gas credit cards limit you to only U.S. gas purchases and often exclude wholesale gas purchases, but not this card. There is a $0 annual fee for this card, but you need to have a Costco membership (currently $60). The main catch with this card is it’s not simple to redeem rewards — cash back will be provided as an annual certificate in February billing statements, redeemable for cash or merchandise at U.S. Costco Warehouses.

Bank of America® Cash Rewards Credit Card

If you select gas as your choice category, you’ll earn a good cashback rate on gas purchases with the Bank of America® Cash Rewards Credit Card. The card offers 3% and 2% cash back on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, 1% on all other purchases. There is a $0 annual fee. Cardholders who will have the most benefit are Bank of America Preferred Rewards members. As a Preferred Rewards member, you can earn 25-75% more cash back on every purchase, making your gas cash back an effective 3.75%-5.25%. There’s a sign-up bonus that can kick-start your rewards: $200 online cash rewards bonus after you make at least $1,000 in purchases in the first 90 days of account opening.

Which card is the right fit for me?

Since there are many credit cards for you to maximize your rewards from gas purchases, it can be confusing to choose a card. There are cards that offer high rates without caps. Others come with additional bonus categories to consider.

The table below breaks down which gas card may be a good fit for you when factoring annual gas spending, cashback rate and annual fee. (Sign-on bonuses are not reflected.) Keep in mind: This only factors in spending on gas purchases and doesn’t consider if you spend in other categories or at the other cashback rates.

Here are several key takeaways:

  • The Bank of America® Cash Rewards Credit Card will earn you the most cash back ONLY if you’re a Preferred Rewards member with at least $100,000 in a Bank of America checking/savings account. Otherwise, the Platinum Visa® from Abound Credit Union will earn you the most cash back.
  • Although the Costco Anywhere Visa® Card by Citi doesn’t earn you the most cash back, it may be a better fit for Costco shoppers due to the other high-cashback categories.
  • You won’t earn the best cashback rate with the Bank of America® Cash Rewards Credit Card unless you’re a Bank of America Preferred Rewards client with $100,000 in a checking or savings account — allowing you to earn 75% more cash back on every purchase.
  • The Sams Club® Mastercard® is a good option for current members who fuel up at Sam’s Club and spend $5,000 or less a year on gas.
  

Card

Fort Knox Credit Union Visa® Platinum

Costco Anywhere Visa® Card by Citi

Bank of America® Cash Rewards Credit Card: without a BofA checking / savings

Bank of America® Cash Rewards Credit Card: with $100,000 in a BofA checking / savings

Sam's Club® Mastercard®

Spending

$1,000

$50

$40

$30

$53

$50

$2,000

$100

$80

$60

$105

$100

$3,000

$150

$120

$90

$158

$150

$4,000

$200

$160

$120

$210

$200

$5,000

$250

$200

$150

$263

$250

$6,000

$300

$240

$180

$315

$300

$7,000

$350

$280

$210

$368

$310

$8,000

$400

$290

$240

$420

$320

$9,000

$450

$300

$270

$473

$330

$10,000

$500

$310

$300

$525

$340

*We did not include the Costco and Sam’s Club membership fees in our calculations.

The information related to Bank of America® Cash Rewards Credit Card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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The Trump Tax Plan Explained

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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When the Trump tax plan, formally known as The Tax Cuts and Jobs Act (TCJA), was enacted in 2017, taxes changed drastically for many Americans. Noted as the most sweeping rewrite of the tax code in more than three decades, the tax reform implemented new federal income tax brackets and doubled the standard deduction, among many other changes.

The majority of the Trump tax plan’s changes went into effect on Jan. 1, 2018, which means most Americans felt the impact of the TCJA for the first time when they filed their 2019 taxes.

What the Trump tax plan changed

Some of the changes made by the Trump tax plan may already be familiar to you, but here you can read about all of the changes it introduced or jump ahead to read about the rules you’re most interested in:

A 529 college savings plan is a tax-advantaged savings account designed to encourage saving for qualified future higher-education costs, such as tuition, fees and room and board. Your money is invested and grows tax free.

Old Rule

New Rule (Effective Jan. 1, 2018)

Previously, 529 plan savings could only be used on qualified higher education expenses.

New Rule (Effective Jan. 1, 2018)

In a major victory for wealthier families, you can now use 529 savings for private K-12 schooling.

Tax benefits are now extended to eligible education expenses for an elementary or secondary public, private, or religious school.

The new rules allow you to withdraw up to $10,000 a year per student (child) for education costs.

The individual mandate was a key provision of the Affordable Care Act that required non-exempt U.S. citizens and noncitizens who lawfully reside in the country to have health insurance.

Old Rule

New Rule (Effective Jan. 1, 2019)

Consumers who did not qualify for an exemption and chose not to purchase insurance faced a range of tax penalties, depending on income.

New Rule (Effective Jan. 1, 2019)

The individual mandate is out.

Starting Jan. 1, 2019, consumers who do not purchase health insurance will no longer face penalties.

GOP lawmakers argue that the measure will decrease spending on the tax subsidies it offers to balance out the cost of premiums for millions of Obamacare enrollees.

However, without the mandate, experts caution that fewer healthy and young people will sign up for health coverage through the insurance marketplace, which will likely lead to increases in premium costs for those who remain the marketplace and could even induce some insurers to drop out of the market altogether. It’s a big blow to supporters of the long-embattled health care law.

Old Rule

New Rule (Effective Jan. 1, 2019)

The individual paying alimony or maintenance payments could deduct payments from their income. The person receiving the payments included them as income.

New Rule (Effective Jan. 1, 2019)

The person making alimony or maintenance payments does not get to deduct them, and the recipient does not claim the payments as income. This goes into effect for any divorce or separation agreement signed or modified on or after Jan. 1, 2019.

The individual alternative minimum tax, or AMT, often imposed on higher-income families, especially those with children, who live in high-tax states — but not necessarily the ultra rich. It requires many households or individuals to calculate their tax due under the AMT rules alongside the rules for regular income tax. They have to pay the higher amount. Whether or not a someone pays AMT depends on their alternative minimum taxable income (AMTI). AMTI is determined through a series of assessments of a taxpayer’s income and assets — the explanation of calculating AMTI takes up two pages in the tax bill, so we’re not getting into the details here.

Old Rule

New Rule (Effective Jan. 1, 2018)

The exemption amount was $84,500 for married joint-filing couples, $54,300 for single filers and $42,250 for married couples filing separately.

The AMT exemption began to phase out at $120,700 for singles, $160,900 for married couples filing jointly and $80,450 for married couples filing separately.

New Rule (Effective Jan. 1, 2018)

The AMT is here to stay but fewer households will have to face it.

Under the new rules, which are in effect from Jan. 1, 2018 through Dec. 31, 2025, married couples filing jointly will be exempt from the alternative minimum tax starting at $109,400. Exemption starts at $70,300 for all other taxpayers (other than estates and trusts).

The exemption phase-out thresholds will rise to $1,000,000 for married couples filing jointly, and $500,000 for all other taxpayers.

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers could exclude up to $20 a month of qualified bicycle commuting reimbursements from their gross income. That included payments from employers for things like a bicycle purchase, bike maintenance or storage. Workers could claim the exclusion in any month they regularly use a bicycle to commute to work and do not receive other transit benefits.

New Rule (Effective Jan. 1, 2018)

The exclusion is suspended through 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

The child tax credit was $1,000 per child under the age of 17.

The credit was reduced by $50 for each $1,000 a taxpayer earned over certain thresholds. The phase-out thresholds started at a modified adjusted gross income (AGI) over $75,000 for single individuals and heads of household, $110,000 for married couples filing jointly and $55,000 for married couples filing separately.

New Rule (Effective Jan. 1, 2018)

The child tax credit doubles to $2,000 per qualifying child. Up to $1,400 of the child tax credit can be received as refundable credit (meaning it can go toward a tax refund). The new rule also includes a $500 nonrefundable credit per dependent other than a qualifying child.

The credit begins to phase out at an AGI over $200,000 — for married couples, the phase-out starts at an AGI over $400,000.

This rule is in effect through 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

Under a four-step graduated rate structure, the top corporate tax rate was 35 percent on taxable income greater than $10 million.

New Rule (Effective Jan. 1, 2018)

Permanently cuts the top corporate tax rate to 21 percent.

The estate tax, aka the “Death Tax” is a tax levied on significantly large estates that are passed down to heirs.

Old Rule

New Rule (Effective Jan. 1, 2018)

Estates up to $5.49 million in value were exempt from the tax.

The top tax rate was 40 percent.

New Rule (Effective Jan. 1, 2018)

Doubles the exemption for the estate tax.

Now, estates up to $11.2 million are exempt from the tax.

Old Rule

New Rule (Effective Jan. 1, 2018)

Homeowners could exclude up to $250,000 (or $500,000, if married filing jointly) of gains made when selling their primary residence, as long as they owned and primarily lived in the home for at least two of the five years before the sale. The exclusion could be claimed only once in a two-year period.

New Rule (Effective Jan. 1, 2018)

Homeowners can still exclude gains up to $250,000 (or $500,000 if married filing jointly) when they sell their primary residence, but they have to have lived there longer. People who sell their homes after Dec. 31, 2017 now have to use the home as their primary residence for five of the eight years before the sale in order to claim the exclusion. It can only be claimed once in a five-year period.

The new rule expires on Dec. 31, 2025.

Old Rule

New Rule

Taxpayers were previously allowed to deduct out-of-pocket medical expenses that exceed 10 percent of their adjusted gross income or 7.5 percent if they or their spouse were 65 or older.

New Rule

The threshold for all taxpayers to claim an itemized deduction for medical expenses is lowered to 7.5 percent of a filer’s adjusted gross income.

The change applies to taxable years from Dec. 31, 2016 to Jan. 1, 2019.

Taxpayers can take the miscellaneous tax deduction if the items total more than 2 percent of their adjusted gross income. The amount that’s deductible is the amount that exceeds the 2 percent threshold. These are some of the major changes coming to the miscellaneous tax deduction.

Old Rule

New Rule (Effective Jan. 1, 2018)

Tax preparation: Taxpayers could claim an itemized deduction of the amount of money they pay for tax-related expenses, like the person who prepares their taxes or any software purchased pr fees paid to fee to file forms electronically.

Work-related expenses: Workers could deduct unreimbursed business expense as an itemized deduction, like the cost of a home office, job-search costs, professional license fees and more.

Investment fees: Taxpayers could deduct fees paid to advisors and brokers to manage their money.

New Rule (Effective Jan. 1, 2018)

Tax preparation: Taxpayers may not claim tax-preparation expenses as an itemized deduction through 2025.

Work-related expenses: The bill suspends work-related expenses as an itemized deduction through 2025.

Investment fees: Under the new rules, the investment fee deduction is suspended until 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

Homeowners were allowed to deduct interest paid on mortgages valued up to $1 million on a taxpayer’s principal residence and one other qualified residence.

They could also deduct interest paid on a home equity loan or home equity line of credit no greater than $100,000. These were itemized deductions.

New Rule (Effective Jan. 1, 2018)

New homeowners can include mortgage interest paid on up to $750,000 of principal value on a new home in their itemized deductions.

The old, $1 million caps continues to apply to current homeowners (those who took out their mortgages on or before Dec. 15, 2017), as well as refinancing on mortgages taken out on or before Dec. 15, 2017, as long as new mortgage amount does not exceed the amount of debt being refinanced.

Homeowners CAN deduct interest paid on a home equity line of credit or home equity loan, so long as the loan was used to buy, build or substantially improve your home.

These changes are set to expire after 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

Previous tax law allowed taxpayers to deduct moving expenses as long as the move was of a certain distance from the taxpayer’s previous home and the job in the new location is full-time.

New Rule (Effective Jan. 1, 2018)

The new tax bill suspends the moving expense deduction through 2025. Until then, taxpayers are not permitted to deduct moving expenses.

Moving-related deductions and exclusions remain in place for members of the military.

Pass-through businesses are generally small businesses (also some big firms) that don’t pay the corporate income tax. Instead, the owners report the corporate profits as their own income and pay taxes based on the individual tax rates along with their regular personal income tax.

Some of the common types of pass-through businesses are partnerships, LLCs (limited liability companies), S corporations and sole proprietorships.

Old Rule

New Rule (Effective Jan. 1, 2018)

All pass-through business owners’ income was previously subject to regular personal income tax.

New Rule (Effective Jan. 1, 2018)

Under the new laws, pass-through business owners can deduct up to 20 percent of their qualified business income from a partnership, S corporation or sole proprietorship.

Individuals earning $157,500 and married couples earning $315,000 are eligible for the fullest deduction.

Old Rule

New Rule (Effective Jan. 1, 2018)

Individuals could deduct uninsured losses above $100 when property was lost to a fire, shipwreck, flood, storm, earthquake or other natural disaster. The deduction was allowed as long as the total loss amounted to greater than 10 percent of the taxpayer’s adjusted gross income.

New Rule (Effective Jan. 1, 2018)

The new tax bill only allows taxpayers to claim the deduction if the loss occurred during a federally declared disaster, through 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers could reduce their adjusted gross income by claiming personal exemptions — generally for the taxpayer, their spouse and their dependents.

Taxpayers could deduct $4,050 per exemption in 2017, though the deduction was phased out for taxpayers earning more than certain AGI thresholds. The phase out began at an AGI over $313,800 for married couples filing jointly, $287,650 for heads of household, $156,900 for married couples filing separately and $261,500 for all other taxpayers.

New Rule (Effective Jan. 1, 2018)

Personal exemptions have been suspended through 2025.

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers who did not itemize could claim the current standard deduction of $6,350 for single individuals, $9,350 for heads of household or $12,700 for married couples filing jointly

New Rule (Effective Jan. 1, 2018)

Standard deductions for all nearly double under the new rules.

Individuals see standard deductions rise to $12,000; forlim heads of household, it rises to $18,000; and for married couples filing jointly the standard deduction increases to $24,000.

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers had the option of including state and local property, income and sales taxes as itemized deductions.

New Rule (Effective Jan. 1, 2018)

Taxpayers are limited to claiming an itemized deduction of $10,000 in combined state and local income, sales and property taxes, starting in 2018 through 2025.

Taxpayers cannot get around these limits by prepaying 2018 state and local income taxes while it is still 2017. The bill says nothing about prepaying 2018 property taxes.

Old Rule

New Rule (Effective Jan. 1, 2018)

Student loan debt discharged due to death or disability was taxed as income.

New Rule (Effective Jan. 1, 2018)

Under the new tax bill, student loan debt discharged due to death or disability after Dec. 31, 2017, will not be taxed as income. The rule lasts through 2025.

The table below shows the difference between the tax rates and brackets before the Trump tax plan went into effect on Jan. 1, 2018 and after.

Tax Rules Pre-TCJA

Tax Rules Post-TCJA

Before 2018, there were seven tax brackets.

The rate on the highest earners was 39.6 percent for taxpayers earning above $418,400 for individuals and $470,700 for married couples filing taxes jointly.

New Rule (Effective Jan. 1, 2018)

The new rules retain seven tax brackets, but the brackets have been modified to lower most individual income tax rates. The new brackets expire in 2027.

Top income earners — above $500,000 for individuals and above $600,000 for married couples filing jointly — falls from 39.6 percent to 37 percent.

The majority of individual income tax changes would be temporary, expiring after Dec.
31, 2025.

Pre-TCJA Tax Brackets Post-TCJA Tax Brackets (Effective Jan. 1, 2018)
Single Individuals
Taxable Income Tax Bracket Taxable Income Tax Bracket
$9,325 or less 10% $9,525 or less 10%
$9,326 to $37,950 15% $9,526 to $38,700 12%
$37,951 to $91,900 25% $38,701 to $82,500 22%
$91,901 to $191,650 28% $82,501 to $157,500 24%
$191,651 to $416,700 33% $157,501 to $200,000 32%
$416,701 to $418,400 35% $200,001 to $500,000 35%
Over $418,400 39.60% Over $500,000 37%

Married Individuals Filing Joint Returns and Surviving Spouses
Taxable Income Tax Bracket Taxable Income Tax Bracket
$18,650 or less 10% $19,050 or less 10%
$18,651 to $75,900 15% $19,051 to $77,400 12%
$75,901 to $153,100 25% $77,401 to $165,000 22%
$153,101 to $233,350 28% $165,001 to $315,000 24%
$233,351 to $416,700 33% $315,001 to $400,000 32%
$416,701 to $470,700 35% $400,001 to $600,000 35%
Over $470,700 39.60% Over $600,000 37%

Heads of Households
Taxable Income Tax Bracket Taxable Income Tax Bracket
$13,350 or less 10% $13,600 or less 10%
$13,351 to $50,800 15% $13,601 to $51,800 12%
$50,801 to $131,200 25% $51,801 to $82,500 22%
$131,201 to $212,500 28% $82,501 to $157,500 24%
$212,501 to $416,700 33% $157,501 to $200,000 32%
$416,701 to $444,550 35% $200,001 to $500,000 35%
Over $444,550 39.60% Over $500,000 37%

Married Individuals Filing Separate Returns
Taxable Income Tax Bracket Taxable Income Tax Bracket
$9,325 or less 10% Not over $9,525 10%
$9,326 to $37,950 15% $9,525 to $38,700 12%
$37,951 to $76,550 25% $38,701 to $82,500 22%
$76,551 to $116,675 28% $82,501 to $157,500 24%
$116,676 to $208,350 33% $157,501 to $200,000 32%
$208,351 to $235,350 35% $200,001 to $300,000 35%
Over $235,350 39.60% Over $300,000 37%

Tax deductions that didn’t change after the Trump tax plan

Teacher deduction

Teachers can deduct up to $250 for unreimbursed expenses for classroom supplies or school materials from their taxable income.

Electric cars

Electric car owners who bought a vehicle after 2010 may be given tax credit of up to $7,500, depending on the battery capacity.

Adoption assistance

Adoptive parents are allowed a tax credit and employer-provided benefits up to $13,570 per eligible child in 2017.

Student loan interest deduction

Student loan borrowers may deduct up to $2,500 on the interest paid for student loans every year.

How the Trump tax plan affects you

Low-income earners: Changes to the tax rates at lower-income levels were less pronounced or nonexistent compared to the changes in higher brackets, offering no tax break for lower-income households.

Middle-class earners: The decreased tax rates should have decreased the taxable income for middle-class earners, as long as they adjusted their W-4 withholding forms.

High-income earners: With their high levels of income falling into more brackets, high-income taxpayers had more to gain from the lowered tax rates. Those with large amounts of income from investments also benefited from the decreased tax brackets for capital gains, meaning their investment income was also reprieved, especially at high levels.

High-value estates: The Trump tax plan doubled the estate tax exemption amount from $5.49 million in 2017 to $11.2 million in 2018.

Areas with high state and local income tax: The Trump tax plan amended the state and local income tax (SALT) deduction so that taxpayers can only claim up to $10,000 in combined state and local income, sales and property taxes as an itemized deduction. Taxpayers living in places with high state and local taxes will get disproportionately hit by this change.

Taxpayers using personal exemptions: A personal exemption allowed you to deduct set amounts for each taxpayer and dependent on your tax return, which could have benefitted taxpayers with large families of dependents. This exemption and possible tax benefit for many has now been suspended.

Those without health insurance: The Trump tax plan eliminated the tax penalty you could face if you did not enroll for health insurance under the Affordable Care Act (ACA) and did not qualify for an exemption.

FAQ: Tax filing tips for 2020

Taxes for tax year 2019 are due to the IRS by July 15, 2020, due to the extension granted because of the coronavirus pandemic. Hopefully, filers won’t face an unwelcome surprise this year if they end up owing more than usual, as was the case too often last year, and instead receive a nice tax refund.

You might have been overpaying or underpaying on your taxes before the tax reform went into effect, which could mean a tax bill or bigger-than-expected tax refund this time around.

To avoid confusion, consult a tax professional and consider adjusting your allowances on your W-4.

If you end up owing taxes, you’ll need to pay your bill by July 15th or contact the IRS to sign up for a payment plan. Late payments will result in penalties and additional fees.

The IRS typically sends out tax refunds within 21 days of receiving your filing. It can take longer on some occasions, depending on your situation. If you file your return electronically, you can check the status of your refund after 24 hours from filing, through the IRS’ Where’s My Refund? tool. If you mail in your return, you can check the status four weeks after mailing. You can also use your smartphone to download the IRS2Go app to check your refund status.

It’s certainly tempting to use the money to book your next much-deserved vacation. But treating yourself isn’t necessarily the best way to spend your tax refund. Instead, consider stashing it away inside a savings vehicle and forgetting you even had extra cash to spend. An easy option is to boost your emergency savings by depositing your refund in a high-yield online savings account. That will grow your refund efficiently over time and can save you some financial grief in the future. Here are a couple of the best high-yield online savings accounts that have had consistently competitive rates over the past two years and are accessible no matter your deposit or balance:

Institution
APY
Minimum Account Balance to Earn APY
Capital One
360 Performance Savings from Capital One

1.00%

$0

SEE DETAILS 

Member FDIC

Barclays
Online Savings Account from Barclays

1.00%

$0

SEE DETAILS Secured

on Barclays’s secure website

Member FDIC

A savings account can be easily accessed in case you need the funds in a pinch, unlike with a high-rate certificate of deposit. A CD works better if you need to save towards a longer-term goal, like making a down payment on a house in a few years. Once you make your deposit into a CD, it grows undisturbed for the length of its term. In exchange for leaving your deposit untouched with the bank, you get to grow your CD funds at high interest rates, resulting in some solid savings growth when the term ends. Here are some of the best one-year CD rates that have been consistently competitive over the past two years:

Institution
APY
Minimum Account Balance to Earn APY
Barclays
12 Month Online CD from Barclays

0.85%

$0

SEE DETAILS 

Member FDIC

Goldman Sachs Bank USA
High-yield 12 Month CD from Goldman Sachs Bank USA

1.10%

$500

SEE DETAILS Secured

on Goldman Sachs Bank USA’s secure website

Member FDIC

Other options include using your refund to expand your investment portfolio or placing the funds in an IRA. Investing your refund can be a riskier way to grow your money since your returns depend on the market instead of an APY. And of course, saving in an IRA is a smart way to invest in your retirement future. The IRS even allows you to split your refund between multiple accounts when you sign up for direct deposit. This makes it easy for you to save your refund in various ways.

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