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Why Your Tax Refund Is Lower This Year

In late 2017, Republicans passed the largest overhaul of the tax code in 30 years. The Tax Cuts and Jobs Act cut individual income tax rates and doubled the standard deduction.

This means many people saw their take-home pay jump. However, that jump came back and hit many families at tax time, especially if they failed to make changes to their withholdings as many tax professionals and the Government Accountability Office suggested at the beginning of 2018.

Though the new tax plan doubled the standard deduction, it also eliminated personal exemptions. This means that many families who have multiple children will pay higher taxes. Many itemized deductions were changed or eliminated:

  • Deductions of employee business expenses eliminated
  • Deductions of tax preparation fees eliminated
  • Deductions of investment expenses eliminated
  • Job search expense deduction eliminated
  • Deduction of safe deposit box fees eliminated
  • Deduction of employment-related education expenses eliminated
  • Deduction of theft and personal casualty losses suspended
  • Deduction of state and local taxes limited
  • Deduction of mortgage interest limited (in some cases)
  • Alimony payments are no longer deductible
  • The deduction for Health Savings Account contributions was lowered

It is important to remember that getting a smaller refund doesn’t necessarily mean that you paid more in taxes. A refund is essentially a repayment on an overpayment of taxes to U.S. government. These taxes are paid through withholdings taken out of your paycheck by your employer before you receive it. A smaller refund means that you took home more of that money in your paycheck.

Many families look forward to their tax refund as a sort of “bonus” at the beginning of the year. Many of those who receive larger refunds even rely on it as a way to give themselves something of a cushion in the early months of the year, or as a way to recover from the financial pressures that families experience during the holiday season. As early filers began to see changes to their refunds, many have taken to Twitter to complain using the hashtag #TrumpTaxScam:

On Monday, the Treasury Department tried to mitigate some of the online backlash, saying, “News reports on reduction in IRS filings & refunds are misleading. Refunds are consistent with 2017 levels and down slightly from 2018 based on a small initial sample from only a few days of data.”

However, many remained unconvinced.

While others pointed out that the tweet actually confirms that refunds are down from 2018:

Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center pointed out in a blog post that it’s a bit early to forecast whether the majority of Americans will be receiving smaller refunds. Due to the government shutdown, the IRS processed 4.5 million fewer tax returns this year when compared to the same time period last year.

“This is a bit like forecasting your favorite baseball team’s chances of winning the World Series based on the results of its rain-shortened opening day game,” Gleckman wrote.

“Not only are the data incomplete and the Twitter anecdotes meaningless, but this obsession with refunds is wrong-headed. What should matter is not how big a refund check filers get this year but how much total tax they paid for 2018.”

Jenn Bentley is a writer and editor originally from Cadiz, Kentucky. Her writing has been featured in publications such as The Examiner, The High Tech Society, FansShare, Yahoo News, and others. When she’s not writing or editing, Jenn spends her time raising money for Extra Life and advocating for autism awareness.

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