Your Taxes May Be Changing

By: Max Valavanis, CFP®

Inflation has taken its toll on all of us one way or another. Whether you’re worried about an $8 Big Mac or having to take out a loan for a “seemingly” overpriced A/C unit, most Americans are feeling it’s effects. While in recent months we’ve seen this grasp loosen, a new worry may be around the corner, especially for retirees with a fixed income. Taxes! Yes, Uncle Sam wants his piece of the pie, but this time it might be a bit bigger. The Tax Cuts and Jobs Act of 2017 is coming to an end in 2025, and our pockets may be getting a little lighter.

Starting in 2018 most Americans felt a slight but significant relief from the burden of taxes. President Trump signed into law an act that cut the tax rates for nearly every income range. The cut primarily affected the middle class with individual income brackets ranging from around $47,000 to $100,000 seeing their marginal tax rate fall from 25% to 22%. Likewise, the next bracket up, ranging to around $190,000 saw their rate drop 28% to 24%. Unfortunately, once the Tax Cuts and Jobs Act sunsets in 2025, these tax rates are expected to revert back to their previous levels.

Moreover, the act significantly increased the standard deduction for tax filers. In 2017 the single and married standard deductions were $6,500 and $13,000 respectively. Now these deductions are $14,600 and $29,200, more than double what they were. If congress does not amend or extend this act, millions of Americans will have to pay taxes on thousands of dollars of income that are excluded today. 

While many taxpayers, including me, are keeping their fingers crossed hoping for an extension on this act, the continuation is very much up in the air. With this uncertainty, many Americans may have to brace for a significant increase in their taxes. For seniors and retirees, it may be in your best interest to assess how your lifestyle will change with these increases. Both individuals with a surplus of income and those who need to budget could see a meaningful difference in their finances if the taxes revert back to 2017 levels.

The path to understanding how you specifically could be affected can be murky. The Tax Cuts and Jobs Act has many provisions, creating a variety of outcomes for different taxpayers. At ValaVanis Financial, one of our many areas of specialization is Tax Planning. While servicing many households in Brevard County we assist our clients in optimizing their financial future. If you are worried about how your taxes may change in the years to come, or simply would like a second-opinion on your finances, we welcome you to call our office at (321) 956-7072. We offer a complimentary appointment to every reader of the Senior Scene.

Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). ValaVanis Financial and JWC/JWCA are unaffiliated entities.