Did the new 2018 tax laws require less to be withheld for Federal taxes than 2017?
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Did the new 2018 tax laws require less to be withheld for Federal taxes than 2017?

My Federal refund was nearly $1,300 less than last year even though my retired pension (OPM) stayed the same as did my filing status. My itemized deductions actually increased in 2018. The Federal tax withheld in 2018 was $9133.45 vs. $10,594.00 in 2017. Why the big change in withholding?

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Did the new 2018 tax laws require less to be withheld for Federal taxes than 2017?

Yes. Following the passage into law of the Tax Cuts and Jobs Act of 2017, the withholding tables used by employers and payroll services were revised to put more cash into wage earners' pockets.

The impact of the changes being seen in 2018 federal income taxes, as a result of the Tax Cuts and Jobs Act of 2017, is likely going to vary depending on each individual taxpayer's circumstance and their prior reliance of familiar aspects of the tax code that have seen significant change.

The increase in the Standard Deduction and the elimination of the Personal Exemptions are likely to cause the greatest changes for most taxpayers.

For 2018, the increased Standard Deduction amounts for all filers are:

  • Single or Married filing separately—$12,000.
  • Married filing jointly or Qualifying widow(er)—$24,000.
  • Head of household—$18,000.

Please be aware that this increase in the Standard Deduction is accompanied by the suspension, for tax years from 2018 to 2025, of the Personal Exemption, which in 2017 was $4,050 for the taxpayer, spouse, and each dependent.

For taxpayers who have previously itemized their deductions, it is likely that itemizing will be less attractive, due to the following, and other, changes:

  • State, local, property, and sales tax (SALT) deduction – capped at $10,000 ($5,000 if married filing separately).
  • Mortgage interest – capped at interest on $750,000 of mortgage debt.
  • Home equity loan or line of credit -- interest is deductible only if loan was used to buy, build, or substantially improve your home and your total mortgage debt doesn’t exceed $750,000.
  • Miscellaneous deductions subject to the 2% limit – suspended.
  • Personal casualty and theft losses – suspended (with exceptions).

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