Individuals across every state and income level will see their next federal income tax bill drop, on average, according to a recent report from the Tax Policy Center.
“On average” is the key phrase here, though. Drops can vary widely from one state to another and one income group to another. And not everyone will see a decrease in their 2018 tax bill, the one that’s due next April.
The Tax Policy Center analyzed how the Tax Cuts and Jobs Act, which became law in December, impacts individual income taxes. The analysis does not account for changes to corporate tax rates, excise taxes, gift taxes or estate taxes.
Here’s what it shows:
7 states benefit more
Nationwide, folks will see their after-tax income rise by about an average of 1.8 percent in tax year 2018 due to the tax code overhaul, according to the Tax Policy Center.
In seven lucky states, however, the rise in after-tax income will exceed 2.1 percent. These states are:
- North Dakota
- South Dakota
At the other end of the spectrum are three states in which the rise in after-tax incomes will be less than 1.5 percent. They are:
- New York
The wealthiest benefit more
The Tax Policy Center estimates that the tax code overhaul will cut taxes for about 65 percent of households overall, with decreases averaging about $2,200.
However, the center found that the wealthier you are, the more likely you are to see your taxes drop — and the bigger the decrease stands to be.
For example, the overhaul will cut taxes for an estimated 90 percent of households in the top quintile — that’s the top 20 percent of income earners. Their taxes will decrease by an average of $7,170.
But for 27 percent of households in the bottom quintile, it will cut taxes with decreases of an average $190.
In the middle quintile — the middle class — about 82 percent of folks will see a tax cut, with decreases averaging $1,050.
To learn more about how the Tax Cuts and Jobs Act will impact your bottom line in tax year 2018, check out “3 Big Ways the Tax Overhaul Will Affect Your 2018 Tax Return.”
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