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Introduction
The purpose of this next series of articles is to explore the changes in the withholding rates with the new 2018 tax bill as well as the incremental benefit of taking an additional withholding allowance. In this example, married individuals earning $50,000 and $40,000 a year paid on a biweekly basis electing two withholding allowances each.
Calculation
Applicable Withholding
Withholding Calculation
Income Tax Calculation
Discussion
As shown above, the withholding rates for 2018 result in a smaller amount being withheld from each paycheck. The taxpayer will receive an increase on each individual paycheck of $31 and $20, respectively ($816 and $516 annually). Additionally, they will end up paying $576 less on their combined income tax return.
Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.