UPDATED WITH FINAL BILL PASSED DEC 20
Old bills: House & Senate
Tax Plan Calculator FAQ
By Maxim Lott
Why build this site?
I wanted to know how the plans would impact me and and figured other people would want to know the same about their returns.
This calculator is neither pro- nor anti- tax reform. It's a tool to help you figure out whether it's worth supporting.
The site has been used more than a million times and has been checked by many, including tax professionals, for accuracy. As of December 15, it is the only calculator that shows the impact of the final bill.
What does the calculator consider?
The calculator takes into account all of the following:
-- Personal exemption deduction
-- State income tax, local income tax (estimated), property tax deductions
-- Preservation of $10k in state and local deductions
-- Child credit, including all the details of its refundability
-- Standard deduction and whether you should switch
-- All tax rates
-- Pease limits
What does this calculator NOT include?
This calculator includes all the basic tax changes that would impact nearly everyone.
However, it cannot estimate every change (the house bill alone is 450 pages.) To get everything, one would have to rebuild TurboTax for three different tax systems.
Here are things the calculator does NOT consider; if they apply to you, you may want to factor them in on your own:
-- AMT. See here for how to estimate your AMT savings.
-- *Employee* expenses and union dues. IMPORTANT: Expenses for personal businesses and independent contractors ARE still deductible, but are NOT for employees. RECOMMENDATION: add the those deductions to your income and re-run the calculator to see how that changes the result.
-- Rate cuts on "pass through" income
-- Estate/Death tax repeal
-- The site gives notice if AMT might impact you, but does not yet calculate AMT
-- The Earned Income Tax Credit (EITC.) If you are eligible for this, your total bill will be lower than shown, but the reform bills do not change the EITC.
-- Senate bill's tweaks to 401k tax deferment for high-income people and other special cases
-- The bill is hundreds of pages long, and there are undoubtedly other rare deductions impacted that are not listed here.
The following are no longer relevant. They are also not included in the calculation of the old House/Senate bills:
-- House bill's elimination of medical expenses of 10% of income (Senate bill keeps this deduction and makes it slightly more generous, allowing people to deduct what's over 7.5% of income for the first 2 years.)
-- House bill's elimination of student loan deductibility, already capped at $2,500 (not in Senate bill) RECOMMENDATION: add the tuition waivers to your income and re-run the calculator to see how that changes the House Plan result.
-- Different rates for capital gains income
-- House expansion of the "American Opportunity Tax Credit" for tuition -- House bill's elimination of tax deductibility for tuition waivers (not in Senate bill)
-- House bill's elimination of mortgage interest deductibility over $500,000 -- existing mortgages are grandfathered in (not in Senate bill)
-- The calculator currently assumes the AMT is eliminated under the Senate plan, but in fact it is partial elimination
-- Senate increase in age of children eligible for child tax credit from 17 to 18.
How State and Local tax deductions are estimated
NOTE: If you prefer to enter your exact state/local deductions, there is now a field for that at the very bottom of the homepage.
State taxes: The calculator assumes your current-law federal deductions also apply to your state taxes (this is not necessarily the case, but will likely be close.) It then runs the taxable income through the actual state tax brackets to find how much you owe.
In states without state income tax, the calculator estimates your sales taxes (which are deductible if you do not deduct state income tax) by finding the state's total sales tax revenue and dividing the state's household income by that to get the average percentage paid each year. (For example, if Texas' household income is $50k and the state raises 2k per household in sales taxes, that works out to an estimated 4% tax rate.)
New Hampshire is the only state without either income or sales tax. Their revenue comes from property tax and excise taxes that are not likely to be deducted.
Local income taxes are estimated by taking the proportion of local taxes raised in a state and assuming that you pay a similar share. (For example, if Pennsylvanians on average pay 1/3rd as much in local taxes as state taxes, this calculator assumes that you pay 1/3rd as much in local taxes as state taxes.
New York City local taxes are so high that this calculator has a separate option for it. The program handles it as a state -- both state and city taxes are grouped together under "state"
Property taxes are entered manually, due to the high variance in home values and payments.
Don't the tax cuts phase out or "sunset"?
Yes. Rates will rise again in 2025, unless Congress extends them. This was probably done as a budget gimmick to make the long-term cost of the bill appear lower, but done under the assumption that they will be extended past 2025 because nobody wants to be seen as raising taxes on the middle class. The Bush tax cuts had a similar provision, and they were later made permanent except for the rate on those making over $450,000/year, whose rates were reverted. See here for more details.
What about the corporate tax cut?
This calculator is for tax rates on individuals and households only. The corporate tax may increase economic growth, but that is beyond the scope of this calculator.
This calculator does not store information entered.
I pay a different amount in federal tax than the calculator shows
The calculator lists under details exactly how it makes its calculations. If you itemize, make sure you selected "yes" for that on the form. It is also possible that you have special tax circumstances that reduce your taxable gross income; if so, enter an adjusted income into the form based on that. If the state/local estimate is off for your personal situation, there is now a field to enter them exactly, located at the very bottom of the homepage. Also feel free to contact me with questions.
Additions and fixes
For the sake of transparency, I'll keep a list of all changes fixes made: Nov 27: Fixed issue where spouse was not counting as a personal exemption under current law
Nov 28: Made program count the child tax credit phase-out in discreet increments of $1000, rather than as a continuous function Also fixed issue in which child tax credit was phased out per kid, rather than on the whole sum of credits.
Nov 28: Fixed the "family tax credit" for House bill. Previously calculator applied it only to joint filers, but actually it applies even to single, childless filers. Confirmed with House Ways and Means spokesperson.
Nov 30: Fixed calculation issue which was phasing out the personal exemption in current law too slowly
Nov 30: Switched the "current rate" brackets/credits/deductions from 2017 to 2018 (only difference is inflation-adjustments) as 2018 is the comparable year for the House and Senate Bills.
Dec: Fixed a bug around zero income that caused tax bills to be $450 higher (but did not impact cross-plan comparisons.)
Dec 8: Factored in "Pease limits" that apply to high-income people under current law but are eliminated in the reform plans.
Dec 14: Added feature: Selecting "don't know" about itemization now makes calculator figure out which would save you most and pick that.
Dec 14: Added feature: Warns user if they select "no" to itemization if their state and local tax deductions would be higher than standard deduction
Dec 14: Added feature: Users can now enter their exact state & local income taxes if they prefer that over the calculator's estimate.
Dec 14: Added feature: Calculator now precisely estimates how much of family credits are refundable to incomes below zero, so the warning that was in place before has been removed. Dec 15: Added the final conference bill. A brief error that combining SALT and standard deduction on some returns, which was caused by the addition, was fixed.
Dec 15: Fixed issue with married filing separately SALT deduction in conference bill ($5k, not $10k)
Dec 23: Added support for the extra standard deduction for those over 65 or blind.
More questions or comments? Maxim Lott can be reached on Twitter here.
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