02-19-2019, 07:44 PM
(02-19-2019, 07:03 PM)StrictlyBiz Wrote: Thats because the rate that each bracket was reduced does not equal the rate amount that you will save.
Follow this chart
https://www.gpwa.com/wp-content/uploads/2018/01/Individual-and-Corporate-Tax-Rates.pdf
Lets assume that a couple MFJ and made $233,000 in both 2017 and 2018. In 2017 their total tax would be $29,752 and they would be in the 28% bracket (4th bracket).
In 2018, they're still in the 4th bracket (now 24%), but in the middle of it and not the top. For the first 3 brackets they owe $8,907 and another $16,320 for the portion of the 4th bracket that their income falls into. Total tax due for 2018 is $25,227.
Their total savings from 2017 to 2018 is $4525. This represents a 15.2% savings from the previous year even though the percentage drop of their brackets was 0%, 3%, 3%, and 4% respectively.
You are not reading the chart correctly.
233,350 in 2017 equals 52,222 in taxes. That is an effective rate of 22.3
233,350 in 2018 equals 44,583* in taxes. That is an effective rate of 19.1
*28,179 + [.24 x (233,350 - 165,000)]
So the effective rate only drops 3.2 percentage points.