Taxes are looking super high - why?

[Ann.without.an.e]

When I read on the tax code changes, I thought they would only benefit us.  It looks like we have a child tax credit of 5,000 instead of last year's 3,000.  DH made about the same amount and had the same withholding amount.  I am self employed and did have about $6,000 more in income this year.  So I expected a bit of a raise in taxes.  This doesn't put us into a new bracket though and our bracket went down a few percent.  Last year, after deductible work expenses, we had to paid $960 in Federal and we got back $275 in State.  Nothing has really changed for us - no births, deaths, etc.  So I am completely puzzled at what Turbo Tax is saying that we owe.  I feel like I did something wrong or am missing something or there have been huge changes that I don't understand.  The only changes I can see on our part is the 2,000 more in child tax credit, 6,000 more in income (but not changing brackets), and a little lower percent of tax.  Turbo Tax is saying we will owe 6,738 in Federal and 1,255 in State.  Is anyone else having this happen?  

[RootAnn]

Personal exemptions going away?

Other ideas

I won't have info for our taxes for another half a month or more. DH figured ours would go up, so he increased his withholding. Many employers adjusted withholding (down) due to tac tables, so I would look if your dh's withholding was actually the same. 

[historically accurate]

Did you itemize before 2018? Do you itemize now? Because if the deductions didn't change much, the loss of the personal exemptions may be the problem. 

IE: AGI - Deductions - Exemptions = Taxable Income prior to 2018, now it is AGI - Deductions = Taxable Income. 

 

[maize]

Unreimbursed work expenses are no longer deductable.

Some other things that used to be deductable aren't.

I agree with trying a different tax software program or at the least go through the printable forms line by line.

[maize]

Child tax credit only applies to children 16 and younger, did someone age out?

[alisoncooks]

I have no help to offer, but omg...I'd be freaking. Fingers crossed that there was a mistake and you owe much less! 

 

[ktgrok]

Double check all your numbers, you could have entered an extra zero somewhere or something. 

[Acadie]

I did our taxes for many years, but our first year hiring an accountant he found a state tax deduction we'd missed the prior year that more than paid his fee. Dh and I both have writing income, on top of regular wages, and it's been invaluable to have our accountant help us figure out quarterly estimated tax payments, especially with all the changes in tax law. And I imagine we can expect more changes in the next few years.

Amy

[MaeFlowers]

This happened to us on our 2016 taxes. Dh's income went up and our taxes went up the same amount (roughly). I was so streamed. Oh, you made $5000 more, pay $5000 more in taxes! What!?!

He's also self-employed and we didnt move into a new tax bracket. I never figured it out. I did the taxes 4 times, using two programs and then by hand. I had an accountant look over them and they said they were correct. 

We owed 5 figures so we had to make a payment plan because, although we were expecting to pay more, we werent expecting it to go up that much. We quickly became an LLC. The next year, we got a refund for the same amount of income.

Edited January 30, 2019 by MaeFlowers

[regentrude]

You have several children and kids over 16. It's the changes in personal exemptions and standard deduction. Standard deduction has increased, but you can no longer claim exemptions for each child. The new tax code screws families with college age kids

https://www.taxslayer.com/tax-reform/families

"If you filed your taxes in 2018, you should have received a personal exemption of $4,050 for yourself and each of your dependents. Your personal exemption was subtracted from your taxable income in addition to your standard or itemized deductions.

The Tax Cuts and Jobs Act has eliminated this exemption, but it has increased the standard deduction to $24,000 ($12,000 if you are a single filer). For families with few children, this could be good news. But if you have several children or your dependents are over age 17, this could mean that more of your income is taxable."

ETA: The new standard deduction also means that barely anybody will be able to itemize things like charitable deductions.

Edited January 30, 2019 by regentrude

[elegantlion]

Were you self-employed the previous year? If not, have you paid quarterly taxes? The Schedule SE would be the form to check. 

[Ann.without.an.e]

1 hour ago, beckyjo said:

Did you itemize before 2018? Do you itemize now? Because if the deductions didn't change much, the loss of the personal exemptions may be the problem. 

IE: AGI - Deductions - Exemptions = Taxable Income prior to 2018, now it is AGI - Deductions = Taxable Income. 

 

 

Yes, we itemized and we give a good bit to charity.  Maybe this is part of the problem?  I don't understand taxes at all.  Agh.

1 hour ago, happysmileylady said:

Well, it's hard to say without seeing more specific numbers.  Were you affected by some of the changes in the deductions?  

 

One other possibility is that Turbo Tax is just dumb.  I do our taxes by hand every year.  They are really...like *REALLY* simple, and yet every time I have tried tax software, it screws it up.  Have you tried a different software program to see what it says?

 

I am thinking I will do them by hand this year and compare.

11 minutes ago, elegantlion said:

Were you self-employed the previous year? If not, have you paid quarterly taxes? The Schedule SE would be the form to check. 

 

Yes, I have never had to pay quarterly taxes.  I have never owed enough to need to pre-pay, but I will need to start this year.  Someone said that your first year there isn't a penalty?  Lord I hope that's true

16 minutes ago, regentrude said:

You have several children and kids over 16. It's the changes in personal exemptions and standard deduction. Standard deduction has increased, but you can no longer claim exemptions for each child. The new tax code screws families with college age kids

https://www.taxslayer.com/tax-reform/families

"If you filed your taxes in 2018, you should have received a personal exemption of $4,050 for yourself and each of your dependents. Your personal exemption was subtracted from your taxable income in addition to your standard or itemized deductions.

The Tax Cuts and Jobs Act has eliminated this exemption, but it has increased the standard deduction to $24,000 ($12,000 if you are a single filer). For families with few children, this could be good news. But if you have several children or your dependents are over age 17, this could mean that more of your income is taxable."

ETA: The new standard deduction also means that barely anybody will be able to itemize things like charitable deductions.

 

This could be it.  We give a good bit to charity.  We now have 2 kids 17 and over.

17 minutes ago, MaeFlowers said:

This happened to us on our 2016 taxes. Dh's income went up and our taxes went up the same amount (roughly). I was so streamed. Oh, you made $5000 more, pay $5000 more in taxes! What!?!

He's also self-employed and we didnt move into a new tax bracket. I never figured it out. I did the taxes 4 times, using two programs and then by hand. I had an accountant look over them and they said they were correct. 

We owed 5 figures so we had to make a payment plan because, although we were expecting to pay more, we werent expecting it to go up that much. We quickly became an LLC. The next year, we got a refund for the same amount of income.

 

I am curious, how does being an LLC help?

34 minutes ago, Ktgrok said:

Double check all your numbers, you could have entered an extra zero somewhere or something. 

 

Nope, I checked and checked and checked....so hopeful to find an extra zero but no 😞 

1 hour ago, maize said:

Child tax credit only applies to children 16 and younger, did someone age out?

 

But it shows our child tax credit as 3,000 last year and 5,000 this year.

1 hour ago, maize said:

Unreimbursed work expenses are no longer deductable.

Some other things that used to be deductable aren't.

I agree with trying a different tax software program or at the least go through the printable forms line by line.

 

I don't think I have any of those but how knows, haha.

[Ann.without.an.e]

Just now, happysmileylady said:

Are you sure the actual withholding amount didn't change?  A lot of employers adjusted withholdings in early 2018 to go along with the tax changes.  So even though you might not have made any changes to your W4, it's possible that the employer recalculated the dollar amount to a lower amount.  

 

DH will check on this.  It seems pretty similar but he will go online and double check.

[ktgrok]

21 minutes ago, regentrude said:

You have several children and kids over 16. It's the changes in personal exemptions and standard deduction. Standard deduction has increased, but you can no longer claim exemptions for each child. The new tax code screws families with college age kids

https://www.taxslayer.com/tax-reform/families

"If you filed your taxes in 2018, you should have received a personal exemption of $4,050 for yourself and each of your dependents. Your personal exemption was subtracted from your taxable income in addition to your standard or itemized deductions.

The Tax Cuts and Jobs Act has eliminated this exemption, but it has increased the standard deduction to $24,000 ($12,000 if you are a single filer). For families with few children, this could be good news. But if you have several children or your dependents are over age 17, this could mean that more of your income is taxable."

ETA: The new standard deduction also means that barely anybody will be able to itemize things like charitable deductions.

But I think they also did something that helped if you have older kids...can't remember the specifics but I know it helped us. Like, before he had aged out, but now he gets a deduction or credit, just less. 

[maize]

5 minutes ago, Ktgrok said:

But I think they also did something that helped if you have older kids...can't remember the specifics but I know it helped us. Like, before he had aged out, but now he gets a deduction or credit, just less. 

There is a dependent credit, I think $400?

[RootAnn]

It is probably a combo of what several people have pointed out but the dependent exemption going away is probably the biggest thing for you.

I'm amazed you have everything in already. We've barely started getting things. Dh's W-2 just came.

FWIW, I do our taxes and two family member's taxes - all are complicated. TurboTax has been a great help and while you should know the tax code, it hasn't steered me wrong when I know what I'm doing. (My parents used to both work for the IRS & my BIL is a CPA.)

[maize]

Charitable giving no longer results in a tax deduction for many because of the higher standard deduction.

Which combined with loss of personal exemptions can result in increased taxes.

[MaeFlowers]

We became an LLC which files as an S Corp. I can't explain it very well but here is a link that explains how it works.

https://www.nolo.com/legal-encyclopedia/why-you-might-choose-s-corp-taxation-your-llc.html

When we got that 5 figure tax bill, we freaked. Friends suggested we see an accountant and this is what she advised us to do. You might consider having someone look over situation and see what your options are.

[StaceyinLA]

As of right now, and I’m not quite finished, we are getting a good bit more than I expected, and so are all my adult kids who have filed so far.

I was quite surprised because we’ve been bringing home more weekly too, and we have a pretty good income.

[Ann.without.an.e]

I think @regentrude is right.  It comes down to personal exemptions.  Before, we received an exemption for all four kids because they were all under 19 or a full time student under 24.  Now there are no exemptions.  Even with the standard being higher now at 24,000, our exemptions before were 28,900.  We also had a ton of charitable giving on top of that that I think worked in our favor too.  So, we are just in that odd little situation where this new tax form hurts us big time.  😞   So many people have been cheering it, saying how helpful it has been....I just didn't see this coming.

Edited January 30, 2019 by Attolia

[regentrude]

14 minutes ago, Attolia said:

I think @regentrude is right.  It comes down to personal exemptions.  Before, we received an exemption for all four kids because they were all under 19 or a full time student under 24.  Now there are no exemptions.  Even with the standard being higher now at 24,000, our exemptions before were 28,900.  We also had a ton of charitable giving on top of that that I think worked in our favor too.  So, we are just in that odd little situation where this new tax form hurts us big time.  😞   So many people have been cheering it, saying how helpful it has been....I just didn't see this coming.

A LOT of people will be in for a rude awakening. It's not just an "odd little" situation; it will affect many.

That tax reform was pushed through without careful debate and analysis of consequences; there will be many unintended ones. Non-profits are already suffering because people won't donate if they can't deduct it from their taxes.

Edited January 30, 2019 by regentrude

[mommyoffive]

Ugh that really sucks.  I we just got all of our stuff on Monday, and I wanted to drop things off this week, but with the weather I can't .  Things are closed. I am really worried.   I am worried that us having a lot of kids helped us before and this year will be so much different. 

[mommyoffive]

2 minutes ago, regentrude said:

A LOT of people will be in for a rude awakening. It's not just an "odd little" situation; it will affect many.

That tax reform was pushed through without careful debate and analysis of consequences; there will be many unintended ones. Non-profits are already suffering because people won't donate if they can't deduct it from their taxes.

 

For sure.  

[teachermom2834]

I am so sorry. That is so disheartening.

We benefited. Of our four children, the younger two still get the bigger child tax credit and the older two get the American Opportunity credit for college. But we are kind of in a sweet spot for it to work out that way and in a couple years that will no longer be the case.

I am just so sorry. To end up owing when you didn't expect it is just the pits. One of my ds will owe a couple hundred buck and even that really hurts. 

 

 

[regentrude]

2 minutes ago, teachermom2834 said:

We benefited. Of our four children, the younger two still get the bigger child tax credit and the older two get the American Opportunity credit for college.

What changed about the American Opportunity credit with the tax reform? isn't that all still the same as before?

[gardenmom5]

I'm not an accountant, just married to one and the mother of one.

1dd was freaking out, insisting her taxes were higher than last year.  I sent 2ds over, as he's interning at a cpa firm and is much more up on recent changes than dh.  he walked her through - and showed she's actually paying about $2,000 LESS than last year.

[prairiewindmomma]

Our initial numbers look like we are taking a big hit also compared to previous years....high charitable giving, four kids, etc. 😞

[klmama]

Some people are getting around the hit to charitable deductions by donating double every other year,  with no claimed donations in the in-between year. 

[Ann.without.an.e]

I think itemizing helped us more than we ever imagined.  Mainly because of charitable giving.  I feel like charities will start feeling it this year, when people cut back on the giving because it makes no differences in their taxes.  😞 

[cjzimmer1]

I have a couple of things to check over yet (the forms are so different from last year's it's hard to do a direct line by line comparison so I'm not sure where some of the calculations are coming from) but it looks like we will get and extra $350 back.  Our itemized deductions is still above the $24000 so that didn't impact us at all. I was worried with the changes because I kept hearing how big families might not fair well but it looks like we came out ok.

 

ETA actually the $350 is the total change from last year including our state refund (I always look a the total refunds for both because I don't really care where the money is coming from) but after looking at just Federal the difference is around $100.

Edited January 30, 2019 by cjzimmer1

[RootAnn]

We are trying the pay-property-taxes-every-two-years thing (by prepaying in December)  - and 2018 was the off year. I don't see us changing our charitable giving just because of the deductions, but we might load it a little more during the property tax year.

[SeaConquest]

6 minutes ago, RootAnn said:

We are trying the pay-property-taxes-every-two-years thing (by prepaying in December)  - and 2018 was the off year. I don't see us changing our charitable giving just because of the deductions, but we might load it a little more during the property tax year.

 

That's a good idea, if you can swing it. Our property taxes are so high. I am sure how many people will be able to do both.

[Frances]

1 hour ago, regentrude said:

A LOT of people will be in for a rude awakening. It's not just an "odd little" situation; it will affect many.

That tax reform was pushed through without careful debate and analysis of consequences; there will be many unintended ones. Non-profits are already suffering because people won't donate if they can't deduct it from their taxes.

I completely agree about it being pushed through without careful debate and analysis. I’m not so sure about unintended consequences, though. The primary intent was to reduce taxes for the wealthy and corporations. It definitely worked as designed in that respect.

Attolia, I’m sorry about your situation. Larger families, especially those with older children, are definitely not winners under the TCJA.

[barnwife]

If your itemized deductions don't exceed the standard deduction,  you pay two years property taxes (and maybe all your charitable contributions) in order to itemize them in clumped in one year, then take the standard deduction the next year when you've already paid the property taxes. 

I haven't even looked at the taxes this year.  I'd print off a paper copy of the return and print off a paper copy of last years return to compare the amounts. 

[madteaparty]

Nm

Edited January 30, 2019 by madteaparty

[Frances]

On 1/30/2019 at 8:13 AM, Æthelthryth the Texan said:

Can you explain? The way they changed the deductions losing out property tax deductions is some of what’s killing us. We pay a lot in property taxes, so losing that hurt. I see the accountant in two weeks so I’d like to ask about this if it’s something that could help us if you don’t mind explaining here or PMing!

ETA- I always pay our property taxes in a December so trying to figure out how this would differ? 

If 

 

Edited March 4, 2019 by Frances

[madteaparty]

Just now, Frances said:

If your state allows this, ours doesn’t, then it’s like giving all charitable contributions every other year, it can take your itemizes deductions beyond the $24k standard. However, it also won’t work for us because there is still the $10k SALT (state and local taxes) limit. We are already over $10k with one years worth of property taxes and state income taxes. We need that limit raised.

 

Yeah it just worked the first year...

[fairfarmhand]

1 hour ago, Attolia said:

I think @regentrude is right.  It comes down to personal exemptions.  Before, we received an exemption for all four kids because they were all under 19 or a full time student under 24.  Now there are no exemptions.  Even with the standard being higher now at 24,000, our exemptions before were 28,900.  We also had a ton of charitable giving on top of that that I think worked in our favor too.  So, we are just in that odd little situation where this new tax form hurts us big time.  😞   So many people have been cheering it, saying how helpful it has been....I just didn't see this coming.

We’re in the same position. We’ve always had at least 10% of our income devoted to charitable giving and we have a college aged kid. So ours are going to be higher.

[teachermom2834]

58 minutes ago, regentrude said:

What changed about the American Opportunity credit with the tax reform? isn't that all still the same as before?

Nothing- I just meant that losing the dependent deduction for them didn’t hurt as much as it would have without that. Losing the dependent deduction would hurt a lot those with older kids who are not getting the AOC. 

Just meant that my family, personally, had everyone in the right ages and stages of life to do well but that will change as my kids age and graduate. 

[EmseB]

 

1 hour ago, regentrude said:

Non-profits are already suffering because people won't donate if they can't deduct it from their taxes.

Wait..what? People are donating to causes solely to get the tax benefit? That seems...not really charitable, I guess. I am not trying to be sanctimonious, but it would never occur to me to stop giving money to people in need because I wasn't getting a break on my taxes for it. Really???

And I can't figure out how this works. If we gave, say, $15k to charity and itemized in 2017, our standard deduction goes up to $24k in 2018 and we don't have to itemize, correct? So our taxable income is lower and we have to provide less documentation? Why would that cost us more or reduce our giving or make it beneficial to give $30k every other year instead?

I know someone is going to point out I have this all wrong, so be gentle, please.

[mommyoffive]

5 minutes ago, EmseB said:

 

Wait..what? People are donating to causes solely to get the tax benefit? That seems...not really charitable, I guess. I am not trying to be sanctimonious, but it would never occur to me to stop giving money to people in need because I wasn't getting a break on my taxes for it. Really???

And I can't figure out how this works. If we gave, say, $15k to charity and itemized in 2017, our standard deduction goes up to $24k in 2018 and we don't have to itemize, correct? So our taxable income is lower and we have to provide less documentation? Why would that cost us more or reduce our giving or make it beneficial to give $30k every other year instead?

I know someone is going to point out I have this all wrong, so be gentle, please.

 

Oh I think a lot of people do.    I think it also makes people give more than if there was no benefit to it. 

[regentrude]

22 minutes ago, teachermom2834 said:

Nothing- I just meant that losing the dependent deduction for them didn’t hurt as much as it would have without that. Losing the dependent deduction would hurt a lot those with older kids who are not getting the AOC. 

Just meant that my family, personally, had everyone in the right ages and stages of life to do well but that will change as my kids age and graduate. 

But under the old code they would have had both the dependent deduction AND the AOC.

Edited January 30, 2019 by regentrude

[regentrude]

17 minutes ago, EmseB said:

Wait..what? People are donating to causes solely to get the tax benefit? That seems...not really charitable, I guess. I am not trying to be sanctimonious, but it would never occur to me to stop giving money to people in need because I wasn't getting a break on my taxes for it. Really???

The effect is twofold.

1. People are always more likely to donate if they are getting something in return. Otherwise, organizations wouldn't run fundraiser dinners, charity 5ks, trivia nights, send stupid trinkets in the mail... it's psychology.

2. this will be the smaller effect: People  can afford to donate $100, but know they will get back $20 in taxes, so they can actually donate $120.

ETA: "Charitable giving" does not automatically translate into "giving to people in need". A lot of charitable giving, for example, funds the arts. Where you don't see a starving child or homeless mom - the need is more subtle, and yes, people absolutely stop donating to orchestras, outreach programs, women's cultural centers

Edited January 30, 2019 by regentrude

[EmseB]

2 minutes ago, mommyoffive said:

 

Oh I think a lot of people do.    I think it also makes people give more than if there was no benefit to it. 

That is just a totally foreign concept to me. It seems backwards to try to get money out of charitable giving as the only reason to do it...and then stop giving to a cause because you no longer get money from the government for doing so.

But still, if we gave $24k in 2017 we had to itemize that and got a $24k deduction. This year we don't have to itemize and get the same deduction, right? It just makes the threshold for needing to itemize higher?

[regentrude]

1 minute ago, EmseB said:

But still, if we gave $24k in 2017 we had to itemize that and got a $24k deduction. This year we don't have to itemize and get the same deduction, right? It just makes the threshold for needing to itemize higher?

Yes. But most people do not donate $24k or even close.

[mommyoffive]

1 minute ago, EmseB said:

That is just a totally foreign concept to me. It seems backwards to try to get money out of charitable giving as the only reason to do it...and then stop giving to a cause because you no longer get money from the government for doing so.

But still, if we gave $24k in 2017 we had to itemize that and got a $24k deduction. This year we don't have to itemize and get the same deduction, right? It just makes the threshold for needing to itemize higher?

 

I think a lot of people only do it to get something back.  But I also think a lot of people give more because they could.  

[teachermom2834]

8 minutes ago, regentrude said:

But under the old code they would have had both the dependent deduction AND the AOC.

Yes. I really do understand that. 

We made the exact same as last year and are getting a much bigger refund. My comment was really just to point out that some people did benefit. We did to the tune of several thousand dollars, even though we lost the dependent deduction. 

[EmseB]

3 minutes ago, regentrude said:

The effect is twofold.

1. People are always more likely to donate if they are getting something in return. Otherwise, organizations wouldn't run fundraiser dinners, charity 5ks, trivia nights, send stupid trinkets in the mail... it's psychology.

2. this will be the smaller effect: People  can afford to donate $100, but know they will get back $20 in taxes, so they can actually donate $120.

ETA: "Charitable giving" does not automatically translate into "giving to people in need". A lot of charitable giving, for example, funds the arts. Where you don't see a starving child or homeless mom - the need is more subtle, and yes, people absolutely stop donating to orchestras, outreach programs, women's cultural centers

But why? If they believe those things are important and needful and know that they are run through donations, why would they stop giving because they don't get money back? It's still charitable giving, right?

I get some of the psychology of organizations hosting events or sending trinkets. I do understand that it is nice to have a tax deduction for charitable giving. I don't understand only giving because you're getting your money back via the tax code/government. That kind of grosses me out a little. The same as it would if people were only donating to get a trinket in the mail or to go to a nice dinner. 

[Bootsie]

3 minutes ago, EmseB said:

But why? If they believe those things are important and needful and know that they are run through donations, why would they stop giving because they don't get money back? It's still charitable giving, right?

I get some of the psychology of organizations hosting events or sending trinkets. I do understand that it is nice to have a tax deduction for charitable giving. I don't understand only giving because you're getting your money back via the tax code/government. That kind of grosses me out a little. The same as it would if people were only donating to get a trinket in the mail or to go to a nice dinner. 

I think the impact is much more that people give less than people stop giving.  If someone is someone in the 20% tax bracket was getting a deduction for charitable contributions and now does not, it, in effect, increases the cost of giving to the charity by 20%.  Tax deductions for these items were designed to encourage people to give to the charity; it works the other way also.  When the deduction is removed, the encouragement is gone.  

[EmseB]

4 minutes ago, regentrude said:

Yes. But most people do not donate $24k or even close.

Okay, the light bulb just went off after my cup of coffee. Using a married couple as an example:

--In 2017 people were donating above the standard deduction of $12,700 and itemizing their deductions to get the tax benefit

--In 2018 they are now giving less than that or giving nothing at all and just taking the standard $24k deduction because they don't have to donate to get that benefit

Is that what's happening?