How Tax Reform Impacted Our Pursuit of Financial Independence
As we get closer to April 15th, there has been a lot of discussion around the impact of 2017’s Tax Cuts and Jobs Act (TCJA) on U.S. taxpayers.
Not surprisingly, much of that discussion has been politicized.
Rather than jumping into politics, we’re going to look at the facts. Specifically, we’ll examine how the new tax law impacted our family’s pursuit of financial independence in 2018.
My initial reaction to the TCJA was positive. But until completing our taxes, I was unsure exactly how the changes would ultimately impact the ROMT family.
There were several things in the TCJA I thought might help lower our tax bill. Namely, lower tax rates across most tax brackets; doubling of the child tax credit; and less risk of having to pay the alternative minimum tax (AMT).
However, there were also several changes that worried me. I feared new limits on the deductibility of state and local income and property taxes and other changes around itemized deductions might increase our tax bill.
Fortunately, when all was said and done, the new tax law was positive for the ROMT family in 2018. Even better, the impact was much greater than I ever expected it could be!
Our family’s financial situation did not change much last year. But our federal tax rate plunged by more than 25% – to 19% from 25.4% in 2017. The TCJA saved us thousands of dollars that would have otherwise gone to Uncle Sam! The money we saved last year – and hopefully for many years to come – should help boost our pursuit of financial independence and early retirement.
Our 19% tax rate was the lowest we’ve paid since 2012. 2018 was only the fourth time this century our overall tax rate was below 20%!
So for the ROMT family, the TCJA has been a big win! A win that may help us reach financial independence a little sooner than expected!
How did tax reform impact you in 2018?