It looks like we didn’t get crushed by taxes this year, even if we did owe money to the IRS. That’s nice, since we skipped the one step we were supposed to take to avoid an April 15 financial hit.
I knew going into filing season that last year’s tax changes (I prefer not to call them “reform,” as that suggests progress unsupported by the evidence) would slash our deductions. In the bargain, I’d get a 20 percent break on my self-employment income, what the Tax Cuts and Jobs Act of 2017 calls the Qualified Business Income Deduction; our rates would drop somewhat; and we’d lose personal exemptions but gain a child tax credit.
Which ones would outweigh the others? It appears that the rate cuts and the self-employment break made the bigger difference, leaving us paying just over 20 percent on our taxable income compared to the 24 percent we paid on a lower taxable income last year. And that’s even though my spouse did not adjust her tax withholding as recommended.
But without the self-employment deduction–be advised that tax accounting is not exactly one of my core competencies–it looks like we would have paid a higher rate.
(No, I won’t provide raw totals. I also use verbs like “appears” because once again, I filed for an extension: I caught some dumb oversights in last year’s return that should slightly lower our bill, but I won’t finish filing until that amended return clears.)
After spending seven years dealing with a tax code that treats self-employment as something to be fined, it’s nice to get a break for it instead. But I also know that the tax code continues to favor investment income over money made from actual work, I continue to resent how it’s gamed by people with the really good accountants and tax lawyers, and I can’t ignore that the tax savings delivered by this rushed bill are paid for by running up the national debt and having the lower rates expire after 2025.
Sorry, politicians: You’re not going to be able to bribe me this way. You know what sort of new tax regime would get my interest? One that didn’t keep me wondering how much we’d owe until I’d pounded through hours of punching numbers into a tax-prep program.