New taxes in effect

[disneysteve]

We talked a bit about the new tax code before it went into effect but I don't think anyone has posted anything since 1/1/18 when it actually took effect. Honestly, I hadn't even thought about it but our payroll manager sent out an email today pointing out that this weeks paycheck is the first one to reflect the change so I was curious how I fared.

I'm not positive this is accurate or that I did it right but I looked at a prior check and calculated the percentage for Federal Withholding and did the same for this check.

Old check: 15.57% withheld
New check: 13.00% withheld

Does that seem right? Taxes are one area that I'm not well versed in.

[Like2Plan]

I'm not positive this is accurate or that I did it right but I looked at a prior check and calculated the percentage for Federal Withholding and did the same for this check.

Old check: 15.57% withheld
New check: 13.00% withheld

Does that seem right? Taxes are one area that I'm not well versed in.

Disneysteve,
One would have to know your pay and payroll period in order to answer that question (because tax withholding is dependent on income levels). But, this link to the 2018 Withholding Tables might help you: https://www.irs.gov/pub/irs-pdf/n1036.pdf

[corn18]

M0 and mine went from 21.7% to 18.2%. So it went down 3.5%. That seems in line with you unless you are withholding at something other than M0.

I think this is over withholding for my base salary. I think I should be withholding at M3 or M4 to break even. I leave it at M0 because they under withhold on my bonuses (I have to pay estimated taxes to make up the final difference).

BTW, if anyone didn't know the supplemental tax rate went from 25% to 22%. So if you get a bonus, that will affect that.

[Like2Plan]

I actually had to increase our withholding as a result of the new withholding schedule. One reason is pretty obvious--DH and I have more than one income source and the withholding schedules only take into consideration income from one income source at a time.

The other reason is we are going to do a conversion from a tIRA to a Roth this year and I think it would be easiest to use the payroll tax withholding to take care of the taxes we will owe.

I have been studying the tax schedules and forecasting our income to try and figure out what our tax liability will be (so I don't do a conversion and get pushed up into a new tax bracket).

For several years I have been making a spread sheet for each tax year that pretty much mirrors the entries that I will be putting on our 1040. It isn't as complicated as I thought it would be. About the only thing that is difficult to forecast is unexpected capital gains on mutual funds (but, we are invested in a pretty tax efficient fund, so far, so good). I have an income section, a deduction section and a tax section (based on our filing status and income brackets). Right now it doesn't look like we will itemize for 2018--so, even easier. This helps me track whether our withholding is right so I can do a midyear adjustment. At tax time I compare my tax liability estimate with my tax software and I always come out pretty close. In the coming years, this is going to help me with the Roth conversions we plan to do.

[phantom]

Today was my first paycheck with the new withholding. It looks like it dropped from 13.02% to 10.38%. My own calculations say I'm going to be paying around 9.13%, so, assuming I understand how the new calculations work, that seems nice and close.

[Gailete]

Between our self-employment income and my SSD check, we don't get taxes taken out of a paycheck and haven't for a very long time. However, I do need to calculate how much of a percentage of earning needs to go into our tax funds for each business.

[bennkar]

I'm jealous reading this as my pay today was identical to earlier ones. Apparently any changes will only be shown on my next pay in two weeks.

[Benderz]

BTW, if anyone didn't know the supplemental tax rate went from 25% to 22%. So if you get a bonus, that will affect that.

Is this just for withholding? Wouldn't the bonus be counted as ordinary income in the end?

[corn18]

Is this just for withholding? Wouldn't the bonus be counted as ordinary income in the end?

Just for withholding.

[LivingAlmostLarge]

I don't see a difference. But according to a improv we might be saving $20k/year in taxes. i'll calculate when more comes out. Apparently there is no limit to itemizing now.