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5 Things You’re Probably Doing Wrong With Your Money

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

5 Things You’re Probably Doing Wrong With Your Money

We’re sure you’re doing a great job with your money — making payments on time, looking out for any fraudulent activity, and putting money into a retirement account. That’s all great.

Still, there are probably just a few areas of your personal finance situation that could use some work. We want to help. Our team at MagnifyMoney has been working in and writing about finance for a long time. Here are our top tips on some things you might be doing wrong, and what to do instead.

1. You’re carrying a balance on your credit card to build your credit score

This is one of the biggest myths out there, says Erin Lowry, content director for MagnifyMoney and founder of Broke Millennial. Carrying a balance on your card each month — and paying interest on it — isn’t necessary to help your score. If you’re looking to build your credit score without paying a penny, you need to do things like keep your utilization rate low (your goal should be to not exceed 30% of your credit limit) and pay in full, on time, each month. For more on building your credit score, check out this piece.

2. You use a debit card for everyday purchases

If you’re responsible enough to keep a budget and pay off expenses in full every month, then you should be using a credit card, says Brian Karimzad, a co-founder of MagnifyMoney who worked in banking and consumer marketing for 15 years. Using a credit card helps you build up your credit score (see above), and offers a lot more when it comes to fraud protection. Check out this piece for more about fraud protection and debit and credit card use.

3. You don’t know your net worth

People always think in terms of monthly payments or getting through the month, which can lead them to think it’s okay to take out huge loans for things like cars they can’t afford, says Nick Clements, a MagnifyMoney co-founder who worked in consumer banking for 15 years. In order to truly gather the full picture of your financial situation, you need to focus on your net worth (your total assets minus any money you owe.)

4. You’re happy that your credit card company believes you’re a valuable customer

Most credit card companies (American Express is a unique exception) make most of their money from “revolving customers” who pay steep interest charges. If you pay your balance in full every month and earn rewards, your credit card company is probably losing money on you. And that is a good thing. If your credit card company loves you, you are probably doing something wrong.

When it comes to banking, you want to be just loyal enough that your bank offers you great perks, but not so much that you’re a profitable customer. Credit card companies make the majority of their money from those who are in debt and pay high interest rates and make the minimum payments on their cards, says Clements. This means you want to be a reliable customer, just not a moneymaking one.

5. You have too much money sitting in liquid assets

Fear keeps many people from investing their money, but that could be a big mistake, says Lowry. The truth is that investing your money low-cost index fund will likely grow your money fast enough to keep up with (or beat) inflation, or rising prices, so that 10, 20 or 30 years down the road, you can actually think about retiring comfortably. Check out this piece if you’re wondering whether it’s better for you to invest or pay off credit card debt, and this one to learn whether or not investing in stocks is right for your family.

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.

Cheryl Lock
Cheryl Lock |

Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at cheryl@magnifymoney.com

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Where Taxpayers Get the Biggest Tax Refund 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

The 2019 tax season officially kicked off January 28, and 150 million tax returns are expected to be filed this year. While most filers will look forward to getting a refund, others might be worried that they’ll owe taxes to the IRS. Whether you can look forward to a refund is probably tied to where you live, according to the latest MagnifyMoney annual tax study (see 2018 results here). We analyzed IRS tax data for 100 of the largest U.S. metros over a five-year period (2013-2017) to find out where people owe the most taxes at the time they file their return — and where people are getting the biggest tax refunds.

Key findings:

Taxpayers are getting smaller refunds while tax bills are increasing. On average, we found taxpayers in the 100 largest metros who owed taxes faced a federal tax bill of $5,307 when they filed, while those taxpayers who got a refund averaged $3,016. Compared to last year’s study, which reported an average tax bill of $5,294 and average refunds of $3,052 for returns filed 2012 to 2016.

Nearly one in five taxpayers owes Uncle Sam when he or she files. Among the 100 metros analyzed, 19% of taxpayers owed taxes and 77% got a refund. This shows a trend of more people owing taxes and fewer receiving refunds, as our previous study found 17% of city-dwelling residents owed taxes and 78% received refunds.

High tax bills could correlate to more itemized returns. As in last year’s study, an average of 33% of taxpayers itemized their taxes each year during the study period. But a greater proportion of filers itemized their returns in the 10 metros where taxpayers owed the most. In these cities, on average, 39% of filers itemized their taxes.

In San Francisco, the second-ranking metro with filers who owed the most, some 40% of taxpayers itemize. The exception was Sarasota, Fla. Although the 27% of taxpayers who itemize there was below the national average of 33%, the share of Sarasotans who owed taxes was greater than the national average (21% versus 19%).

Of course, with the 2018 tax reform changes, fewer people will likely itemize when they file taxes this year since the standard deduction was raised.

More people face tax bills in the West. Eight of the top 10 metros where taxpayers owed the IRS were located in the Western United States. California metros took three of the top spots. But Denver was in a three-way tie for second place along with Sacramento and San Diego, where 22% of taxpayers owed Uncle Sam in all three metros. However, Denver has slightly bigger problems, given the average taxpayer there owes more — $5,642 on average, compared with San Diego ($5,298) and Sacramento ($4,299).

San Francisco ranks high on the list among those who owe taxes. One in four San Francisco taxpayers owes taxes when he or she files, we found, with an average tax bill of $7,261. That’s about 37% greater than the national average. San Franciscans might pay a lot come tax season but they also take home the sixth-largest tax refund – $3,506 vs. the $3,058 national average.

Where taxpayers are getting the biggest tax refunds

Overall, tax refunds fell slightly from a $3,052 average in last year’s study to $3,016 this year.

While the 10 cities where taxpayers receive the biggest tax refunds are the same year-over-year, however, refunds didn’t grow in every metro area. Tax refund amounts trended down in three Texas cities: McAllen, Houston, and Corpus Christi. San Francisco residents, on the other hand, saw the biggest increase in their tax refunds, getting back $40 more ($3,506 in this year’s study compared to $3,466 in last year’s study).

Where filers are most likely to owe taxes

When looking at the cities where more people ended up owing the IRS at the time of filing, not much has changed.

The average overall size of a tax bill in all top 100 metro areas jumped this year to $5,307 from $5,294. Similarly, the individual averages owed in each of these 10 cities went up. Boise, Idaho’s $120 jump in its average tax bill is the largest increase, dollar-for-dollar.

Higher tax bills correlate with larger tax refunds

A look at the average tax bills and refund amounts in each city reveals an interesting trend: higher tax bills are correlated positively with higher tax refunds.

In other words, the cities where people get fatter refund checks are also where filers who owe taxes will pay the most. The scatter plot below shows this relationship between high refunds and high tax bills.

Take Ft. Myers, Fla. as an example. This city has the biggest tax refunds at $3,833 — but it also has the highest average tax bill of any city, at $8,194.

Tax year 2018 will bring big changes

This study highlights some big trends and differences in tax burdens by city, but it’s based on a past iteration of the American tax code. The Tax Cuts and Jobs Act made sweeping changes to the U.S. tax code that officially took effect for the 2018 tax year (which is outside the five-year period looked at in this study).

So the 2019 tax season is the first time taxpayers will file a return under this new tax code, and the rule changes will bring surprises to many. Only 5% of taxpayers are expected to see their tax costs increase, according to the Tax Policy Center. But confusion over how the tax changes impacted withholding calculations could mean that many taxpayers have already paid too much or too little in taxes.

The proportion of itemized returns is also likely to decrease this tax season. The tax code overhaul included nearly doubling the standard deduction. Since filers have the option to take a standard deduction or itemize their returns, a higher standard deduction is likely to incentivize more of them to do the latter. As a result, itemized tax returns are expected to decrease from 26.4% to just 10.9% among filers, according to the Tax Policy Center.

Tips for filing taxes in 2019

Because the new tax laws will bring many changes, you should expect the unexpected this tax season. And on top of these new changes, the recent federal government shutdown could impact IRS functions and return processing. Here’s what you can do to get ahead of these major tax changes when filing your 2018 return.

File as early as you can. With potential delays at the IRS, it’s even more important to do your part to get your tax refund as soon as you can. The best way to do this is to file as early as possible — don’t put it off until the April 15th deadline. As a bonus, filing early is also a smart way to protect yourself from tax refund theft. And if you end up owing, you’ll also have more time to gather the funds needed to settle your tax bill by the deadline.

Get familiar with new tax forms. The previous years’ tax forms 1040A and 1040EZ are gone, replaced by Form 1040. The new 1040 will be simpler for many tax filers, but not all. Many people will need to file additional schedules with their Form 1040 to adjust taxable income or claimed some tax credits. It’d be wise to review these new forms and changes ahead of completing your return so you know what to expect.

Expect your tax situation to change. With the major changes to the tax code and withholdings in the 2018 tax year, taxpayers should not expect filing to be business as usual. Your tax refund could be higher or lower than it has been in previous years, or you might wind up owing a tax bill. Take a second look at your finances and budget and make a plan for how you’ll manage if you don’t get your usual refund.

If you owe a tax bill, pay it. If you find that you owe a tax bill, pay it as soon as you can. You can file for an extension to give yourself more time to complete a return, but at least 90% of your tax bill will still be due by the April 15th deadline. If you underpay, you’ll owe another 0.5% of the outstanding balance for each month your tax bill goes unpaid.

Consider hiring a professional. With so many tax code changes to grapple with at once, preparing your own taxes could come with more headaches and complications than usual. It could be a good year to hire the help of an accountant or other tax professional. They can review your tax situation, ensure your tax return is prepared correctly and help you identify any potential credits or deductions you might have missed on your own.

Read more: The Best Tax Software of 2019

Methodology:

Using IRS Statements of Income data, we aggregated the data for five years, for returns filed from Jan. 1, 2013 – Dec. 31, 2017 in the 100 largest U.S. metros.

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.

Elyssa Kirkham
Elyssa Kirkham |

Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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Tax Reform 2019 Explained

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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As the 2019 tax deadline approaches, many Americans will feel the impact of last year’s tax tax reform for the first time. It was the most sweeping rewrite of the tax code in more than three decades, after all.

Of importance to most tax filers is the fact that the new tax law altered the federal income tax brackets, doubled the standard deduction and changed many other tax credits and deductions.

The bill, originally known as The Tax Cuts and Jobs Act, didn’t have an easy journey. It was first introduced in the House of Representatives in November 2017, and was signed into law by President Donald Trump on Dec. 22, 2017 after vigorous debate and multiple versions of the bill made their way through both the House and Senate.

With all the developments since then, you may have forgotten about these sweeping tax changes until now. But as you get ready to file your tax return this year, you should prepare for some of the changes that could affect you.

What’s changing— and what isn’t

The majority of the new tax law’s changes went into effect Jan. 1, 2018, which means people filing their 2018 taxes in 2019 will need to take these changes into consideration.

Read on or jump ahead to read about the rules you’re most interested in:

529 college savings plans

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.

ACA individual mandate

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.

Alimony

Old Rule

New Rule (Effective Jan. 1, 2019)

The individual paying alimony or maintenance payments can deduct payments from their income. The person receiving the payments includes 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.

Alternative minimum tax

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 is $84,500 for married joint-filing couples, $54,300 for single filers and $42,250 for married couples filing separately.

The AMT exemption begins 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.

Bicycle commuting

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers can exclude up to $20 a month of qualified bicycle commuting reimbursements from their gross income. That includes payments from employers for things like a bicycle purchase, bike maintenance or storage. Workers can 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.

Child tax credit

Old Rule

New Rule (Effective Jan. 1, 2018)

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

The credit is reduced by $50 for each $1,000 a taxpayer earns over certain thresholds. The phase-out thresholds start 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.

Corporate taxes

Old Rule

New Rule (Effective Jan. 1, 2018)

Under a four-step graduated rate structure, the current top corporate tax rate is 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.

Estate taxes

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.

Gains made on home sales

Old Rule

New Rule (Effective Jan. 1, 2018)

Homeowners can 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 can 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.

Medical expenses

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.

Miscellaneous tax deductions

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 can today 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: Under current law, workers can 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 can currently 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.

Mortgage and home equity loan interest deduction

Old Rule

New Rule (Effective Jan. 1, 2018)

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

They can also deduct interest paid on a home equity loan or home equity line of credit no greater than $100,000. These are 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.

Moving expenses

Old Rule

New Rule (Effective Jan. 1, 2018)

Current law allows taxpayers to deduct moving expenses as long as the move is 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

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.

Personal casualty or theft

Old Rule

New Rule (Effective Jan. 1, 2018)

Under current tax law individuals can deduct uninsured losses above $100 when property is lost to a fire, shipwreck, flood, storm, earthquake or other natural disaster. The deduction is allowed as long as the total loss amounts 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.

Personal exemptions

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers can 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 is phased out for taxpayers earning more than certain AGI thresholds. The phase out begins 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.

Standard deductions

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers who do not itemize can 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.

State and local tax (SALT) deduction

Old Rule

New Rule (Effective Jan. 1, 2018)

Taxpayers may include 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.

Student loan debt discharge

Old Rule

New Rule (Effective Jan. 1, 2018)

Currently, student loan debt discharged due to death or disability is 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.

Tax brackets and income taxes

Old Rule

New Rule (Effective Jan. 1, 2018)

There are currently seven tax brackets.

The rate on the highest earners is 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.

2017 Tax Brackets

New 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-$37,950

15%

$9,526-$38,700

12%

$37,951-$91,900

25%

$38,701-$82,500

22%

$91,901-$191,650

28%

$82,501-$157,500

24%

$191,651-$416,700

33%

$157,501-$200,000

32%

$416,701-$418,400

35%

$200,001-$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-$75,900

15%

$19,051-$77,400

12%

$75,901-$153,100

25%

$77,401-$165,000

22%

$153,101-$233,350

28%

$165,001-$315,000

24%

$233,351-$416,700

33%

$315,001-$400,000

32%

$416,701-$470,700

35%

$400,001-$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-$50,800

15%

$13,601-$51,800

12%

$50,801-$131,200

25%

$51,801-$82,500

22%

$131,201-$212,500

28%

$82,501-$157,500

24%

$212,501-$416,700

33%

$157,501-$200,000

32%

$416,701-$444,550

35%

$200,001-$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-$37,950

15%

$9,525-$38,700

12%

$37,951-$76,550

25%

$38,701-$82,500

22%

$76,551-$116,675

28%

$82,501-$157,500

24%

$116,676- $208,350

33%

$157,501-$200,000

32%

$208,351-$235,350

35%

$200,001-$300,000

35%

Over $235,350

39.60%

Over $300,000

37%

Tax deductions that won’t be changing

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.

FAQ: Tax filing tips for 2019

Taxes for tax year 2018 are due to the IRS by April 15, 2019.  Some filers may face an unwelcome surprise this year if they end up owing more taxes than usual, while others may receive a nice refund they weren’t expecting.

What if I owe taxes due to tax reform?

You might have been overpaying or underpaying on your taxes in 2018, 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 April 15th or contact the IRS to sign up for a payment plan. Late payments will result in penalties and additional fees.

When can I expect my tax refund?

The IRS typically sends out tax refunds within 21 days of receiving your filing. It can take longer in 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.

How should I spend my tax refund?

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 some of the best savings accounts with high rates:

Institution
APY
Minimum Balance to Earn APY
Online Savings Account from Citizens Access
Citizens Access

2.35%

$5,000

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on Citizens Access’s secure website

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High Yield Savings from Synchrony Bank
Synchrony Bank

2.25%

$0

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on Synchrony Bank’s secure website

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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:

Institution
APY
Minimum Balance to Earn APY
12 Month CD from Synchrony Bank
Synchrony Bank

2.80%

$2,000

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on Synchrony Bank’s secure website

High Yield 12-Month CD from Ally Bank
Ally Bank

2.75%

$0

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on Ally Bank’s secure website

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.

Brittney Laryea and Shen Lu contributed to this article. 

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Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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