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Redrick Terry: It is now time for 4 Your Money. We’re joined as always by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson: Thanks [Roderick].
Redrick Terry: Glad-
David Nelson: Appreciate it.
Redrick Terry: Glad to have you here.
David Nelson: Thank you.
Redrick Terry: As always, we’re talking taxes now.
David Nelson: Yes.
Redrick Terry: And we’re well into the first tax season under these new laws. We’ve seen stories that a lot of people are getting refunds that are smaller than they anticipated. Uh, what do you see as the reason behind that?
David Nelson: Sure. So, the, the, exciting part of this is we have three weeks of taxes to discuss.
Redrick Terry: Yes.
David Nelson: So three weeks in a row. So we’re gonna be, uh, sharing some ideas, and, and those individuals that are out there paying more than they think they need to pay, pay close attention because there are some opportunities. As a country, uh, we pay about $1.5 trillion as far as an income tax, which figures out to a little over 8% of the GDP. So that’s the backdrop.
Now, specific to your question, um, most individuals, uh, will find that when they look at what they’ve actually paid in income taxes, it’s actually going down this year. Uh, refunds have gone down as well, and part of that, uh, centers around that, uh, uh, in the first quarter of the year, we had, um, uh, the tax reform change that kicked in. And so the average person as far as saw their paycheck increase by a few bucks, and so the few bucks here as far as on a, on a weekly basis, uh, equates to, uh, to, to a smaller refund.
So net, net most individuals, 2-3% reduction as far as in taxes that they pay, but it may not feel that way-
Redrick Terry: Certainly.
David Nelson: -when it comes to, you know, uh, fi- uh, filling out their tax return.
Redrick Terry: Definitely. Kind of a 1+1=2 thing, right?
David Nelson: (laughs)
Redrick Terry: You pay less, so you’re gonna get back less.
David Nelson: Exactly.
Redrick Terry: But what are some of the biggest items that people should be looking at in terms of how these changes impact them specifically?
David Nelson: Two biggies. Uh, the standard deduction, and I know we’ve, uh, discussed, uh, this, uh, on prior programs but it’s really important for individuals to understand this. Standard deduction, married couple, was roughly $12,000. It’s now roughly $24,000. So by increasing that, many individuals are going to find themself now not able to, to file, uh, a long, uh, uh, form as far as on their tax return. In other words, most of their itemized deductions have disappeared. They’ve gone away. So that, that’s a biggie.
The other one, and, uh, that will help a lot of, um, uh, average income earners. The other big one centers around, um, uh, individuals that have what we call sa-salt preference items. So basically what the salt preference items, uh, uh, center ’round is real estate taxes, and state income taxes that may or may not be deductible as far as on your federal estate, uh, on your federal tax return. In the past, they were. Currently, uh, depending on your particular situation, they may or may not.
Redrick Terry: Yep. And this overall the changes were kind of presented as a tax deduction. They were, they were, things were supposed to go down. So for everybody did they go down?
David Nelson: No, they haven’t for everyone. Uh, probably… and I know we’re tight on time so I’ll try to be brief on this one. If you’re a single individual and you make a decent income, your taxes probably went up. Uh, how they, uh, you know, identify that particular market as far as going up, I don’t know exactly. But clearly, that’s the one. Lot of other individuals, their taxes have actually gone down as far as in, in 18. So really good news for them. Not so good news for a few people [inaudible] (laughs).
Redrick Terry: (laughs) Certainly a case-by-case basis, for sure.
David Nelson: Exactly.
Redrick Terry: Your results may vary (laughs).
David Nelson: Exactly (laughs).
Redrick Terry: David, thank you so much for joining us.
David Nelson: Thank you.
Redrick Terry: And if you missed any of our discussion, we’ll make it available to you on OurQuadCities.com.
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