By Katie Reilly
February 2, 2018

Many Americans will likely see a bump in their paycheck this month as employers withhold less money to account for expected tax cuts.

New guidance about how much money employers should withhold for income taxes was released by the Department of the Treasury and the IRS on Jan. 11, after President Trump signed the $1.5 trillion tax overhaul plan into law. Employers were instructed to implement the new withholding rates by Feb. 15, which means most employees will begin to see the effect this month, if they haven’t already.

The Department of the Treasury said 90% of Americans would see an increase in their take-home pay as a result. The time period when employees could see a change on their pay check varies based on how quickly their employer implemented the new guidance and how often they get paid, the IRS said.

“With this guidance, most American workers will begin to see bigger paychecks. We estimate that 90 percent of wage earners will experience an increase in their take home pay,” U.S. Treasury Secretary Steven Mnuchin said in a statement last month. “The Administration’s monumental tax reform legislation continues to provide economic benefits for hard-working Americans. These tax cuts will ensure that American workers are able to keep more of their hard earned income and decide how to spend, invest or save it.”

Overall, about 80% of households are expected to receive a tax cut in 2018, while 5% of households will see a tax increase, according to an analysis by the independent Tax Policy Center. The most significant benefits will go to those making more than $300,000, the center said.

An updated IRS withholding calculator is expected to be available by the end of the month to help people determine if the right amount of money is being withheld. If not, they could discover they owe more money when they file taxes next year.


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