Case Studies on How New Tax Law May Impact Different Families

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Various experts tasked with studying the new tax laws determined that there are different impacts on families based on certain factors for each. These may include or involve single parents, multiple children and extended families where grandparents receive their grandchildren as primary caregivers.

The initial start of the Tax Cuts and Jobs Act is to ensure that the average family has reduced taxes for every income group available. Unfortunately, the most obvious impact observed first with the TCJA is that some families pay higher taxes and there are differing benefits based on these dissimilar elements. These case studies show that even families in the same income group may pay or owe different amounts based on those within the household. When compared with inflation and after the provision expire, these same families may pay higher taxes than the Act explains.

Family Composition

Provisions with the TCJA differ based on child ages and amounts. For a single-family couple with about $75,000 in wages for one year, the exemptions may include four if the children are under seventeen years. When these youths are seventeen or eighteen, the additional exemptions disappear. Tax credits of $1000 are available when the adolescents are under the age. Benefits of the Act may increase child tax credits to $2000 and also provide another $500 for ineligible youths. However, it does also eliminate the personal exemptions. This could confuse many families filing without an expert.

TCJA Expanded

Personal exemptions are lost, and inflation is not a consideration over time. For families with children under seventeen, the benefits are obvious. However, once the TCJA expires in 2025 the tax increases may take another two years to show. The tax laws also affect the single taxpayer. If the person owns a business, there are additional deductions in place to protect his or her income. However, single taxpayers may observe higher percentages owed. Local, state and federal taxes apply, and the new law affects the single applicant greater than someone that owns a business. The modifications to taxation provide benefits for businesses in twenty percent taxable income. Individuals may pay a much greater amount based on income.

The loss of personal exemptions causes these individual taxpayers to owe more based on income brackets. The state and local tax deductions are capped at $10,000 for individuals. However, when the company is not a service business, the twenty percent tax rate does not waiver. This provides additional benefits if the person owns a business in certain fields. Even with the cap, the business owner has advantages over single taxpayers. Other rules may apply based on how much a business owner makes. If the company is service related, he or she may pay the same as a single tax filer.

Impact on Different Families

Primary effects on families depends on those within the unit. If there are extended members present in the household, benefits for these others may increase deductions or provide other provisions. The composition of the family may change based on these circumstances. The TCJA may take personal exemptions away, but family exemptions still exist. This provides advantages when the primary income earner is able to apply the stipulations to tax forms. However, the impact on the family through income and taxes may not become apparent without utilizing the services of a tax professional. This may be a preparer through an agency or another person such as a tax lawyer.

Married couples with children and other dependents may see extra deductions applied to their taxes. Other benefits provided through these processes occur with business owners that have families. Unless the company is service related, the business may increase deductions until income received exceeds $200,000. Additional state deductions and provisions may exist that benefit families and business owners in excess of federal regulations.

Consulting a Professional

The tax laws change constantly. The specific deductions and exemptions may require the services of a professional to unravel confusion. Many seek an agency to file the tax form and seek the best possible benefits. However, in certain instances, a lawyer is the better option to ensure rights are safe and violations do not occur.
Hiring a lawyer for tax laws is important. The lawyer may ensure the correct forms and options are chosen. He or she may also help prevent violations to tax laws. This is important so the family may progress through the changes successfully. Large returns are possible when a lawyer becomes part of the situation.


Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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