NEW YORK (Reuters) - No matter what version of the U.S. tax overhaul being considered by Congress becomes law, it looks like I am going to be paying more in taxes next year.
By how much, I do not know.
Still, after I did some back of the envelope calculations based on my 2016 taxes, I came up with $4,000.
It seemed like a big jump, so I checked with experts, including my own accountant, to see if I had done the math correctly.
As with everything pertaining to taxes, the calculations are complicated. I am well versed in tax policy and personal finance, but it is hard for any individual - as well as professionals - to figure out the impact of tax reform.
For one thing, the bills passed by the Senate and the U.S. House of Representatives do not match yet on key points like tax brackets, child credits and deductions.
Despite all the charts and tables that show how many people will pay more and how many will pay less, averages do not help individual taxpayers figure out if their paychecks will be larger or smaller next spring or not.
I am one of 22 million Americans who file “head of household,” a bracket for unmarried individuals who have dependents which puts the tax somewhere between the rate for singles and marrieds.
Parents used to joke about offspring being valuable for exemptions, but, in reality, my two daughters actually have a dollar value: $4,050. I have been able to claim each of us on prior tax returns as exemptions, for a total of $12,150.
But under the House and Senate bills, the exemption will go away no matter what passes, increasing my taxable income by $12,150. Because I am in a single-parent household with one income, that hits pretty hard. It will hit families with more than two children even harder. And families with college age dependents likely will be hit the hardest.
I also itemize my tax returns because I own a residence and live in the high-tax state of New York. Last year, half of what I claimed as a deduction was state and local taxes, which neither tax bill allows going forward, except for up to $10,000 in property taxes.
The sum of my mortgage interest, property taxes and charitable deductions would not push me over the proposed higher standard deduction - $18,000 in the Senate bill, $18,300 in the House bill.
Because of that, I will likely not itemize under the new tax plan, so I would end up with about $4,000 more in taxable income from items I used to deduct.
Despite the wildly different tax bracket structure proposed by the House and the Senate, my overall income will keep me pretty much at the same tax bracket I have been in all along, except I will have to add on an additional $16,000 to my income.
However, this is where I went off track in my own calculations. Enrolled agent Jeffrey Schneider, a tax accountant in Stuart, Florida, measures tax impact using the effective tax rate - which is a graduated rate you find by dividing your tax by your adjusted gross income. For me, that translates to about $3,200 more tax I could owe.
But then come the credits, where I can possibly make up some ground. Both bills before Congress raise the child tax credit from $1,000 - to $1,600 in the House bill and $2,000 in the Senate bill. They also raise the income limits to be eligible for the full amount, and also change the implications for older children and education costs.
In the end, my overall tax increase could be $1,200 to $2,000. That will work out to roughly $50 to $75 a paycheck.
“If you run it without the itemized deductions, it works out horribly -- for my clients too,” said Craig Smalley, an enrolled agent tax accountant in Orlando, Florida.
But we will not know for sure until a final bill gets pored over by tax professionals and they sort out all the details. Smalley, for one, is not sure that Congress will actually do away with the state and local tax deductions in the end.
“The thing is, we’re in a holding pattern – there’s no possible way to figure it out for real,” Smalley said.
Editing by Lauren Young and Diane Craft