Americans may expect to pay lower federal income taxes after 2018, following the effect of the U.S. government’s tax reforms.
Based on the Bureau of Labor Statistics’ (BLS) data in 2016, the average federal income tax amounted to around $8,370. The recent Tax Cuts and Jobs Act’s effect may reduce this figure in the future due to factors, such as lower rates for marginal taxes and a bigger Child Tax Credit.
It’s not just households that would benefit from the new tax regulations. In the transportation industry, for instance, tax preparation for truckers will be necessary to review the impact of the reduced corporate tax rate from 35% to 21%. Experts believe that this would encourage more business investments in the next two years.
If you work in the gig economy, you should also think about consulting a financial planner to check how much of your income would be taxable under the new regulations. The same applies to high-income earners as changes include lowering their rate to 37% from 39.6%.
A tax calculation for personal income is generally much easier than doing it for companies. The average American with a job paid almost $10,490 in personal taxes that accounted for 14% of the average income in 2016, when the median salary amounted to more than $74,600, according to the BLS.
Aside from the federal income tax, most employed Americans also pay for state and local taxes that cost them around $2,000 during the same year. In the end, the average household in the U.S. paid $14,210 in taxes two years ago, excluding sales taxes.
While the tax cuts seemingly offer good news for individuals and companies, there is a need to consult a financial or tax advisor and find out how the new policies will positively affect your income.