The IRS has released the new federal income tax brackets for tax year 2018 in January and we have updated our paycheck calculators to accommodate the changes. Many people expect to see bigger paychecks under the Tax Cuts and Jobs Act passed at the end of last year.
But how much more can you expect from your paycheck?
We have been asked about the new tax brackets frequently and thought it may be interesting to see the actual effect of new 2018 tax brackets. We used the following conditions and ran several scenarios for different level of incomes to compare tax years 2017 and 2018.
- Condition 1 – Single with 1 allowance, basically a single worker supporting him or herself.
- Condition 2 – Married with 4 allowances, roughly a family of 4
Assuming a monthly taxable income of $600, $1,000, $3,000, $5,000 and $10,000, here are the resulting Federal tax withholding amounts for tax year 2017 and 2018.
| Monthly Income | |||||
| Single + 1 allowance | $600 | $1,000 | $3,000 | $5,000 | $10,000 |
| 2017 | $7 | $47 | $332 | $763 | $2,067 |
| 2018 | $0 | $35 | $266 | $618 | $1,767 |
| Difference | $7 | $12 | $66 | $145 | $300 |
| Monthly Income | |||||
| Married + 4 allowance | $600 | $1,000 | $3,000 | $5,000 | $10,000 |
| 2017 | $0 | $0 | $93 | $362 | $1,272 |
| 2018 | $0 | $0 | $65 | $287 | $1,007 |
| Difference | $0 | $0 | $28 | $75 | $265 |
A typical worker may see an increase of a few dollars to hundreds of dollars each month. Of course, the more taxes you pay, the bigger the difference. It is important to note that the withholding is just an estimate of the tax liability. Actual tax liability will be determined when the form 1040 is filed next year.
To estimate your 2018 federal taxable income, please use our FREE Payroll Tax Calculator with the newly introduced federal income tax brackets.