Yellowstone Financial, Inc.

Find Out Now If You’ll Owe Taxes

With the passage of the Tax Cuts and Job Act last December, we now live in a new tax world for individuals and businesses.  Many hoary rules of thumb for tax smart decisions have suddenly changed.  Most of you will not itemize your tax return for 2018, which means you won’t be deducting mortgage interest or charitable contributions.  Not all news is negative, of course, as tax rates have mostly declined and they will increase slower than before as your income goes up.  The standard deduction is much higher at $24,000 for most married couples, while child tax credits are now accessible to more of the upper middle class.

So what does this mean to you come next April?  Unfortunately, at least for this one year of transition to the new tax regime, the future of your tax bill is cloudy.  Even if your overall tax bill declines, it’s certainly possible that because of paycheck tax withholding changing this year that you will owe when you file even if you’re accustomed to a refund.   Those who have been cavorting with the proceeds of fatter deposits into their checking account this year may find themselves with an April hangover.

This presents a significant issue to most Americans who are not accustomed to coming up with four figure checks to send into the IRS with their return.  The non-partisan Congressional GAO recently released a report that the number of taxpayers who will owe taxes when filing is expected to increase by 17 percent from last year.  Moreover the US tax system puts us on a pay as you go plan, which means you could owe interest (the IRS charmingly calls it a penalty) in addition to your tax bill.

Before you rush to your tax preparer in a pre-autumnal panic, I do want to stress that the large majority of taxpayers are predicted to receive a refund for 2018 just as in previous years.  It’s just that the new tax law will have an unpredictable effect on how much you’ll owe.  The GAO report cites as an example the case of a single-earner family with two children under 17, $180,000 in pay and $20,000 in other income, and that itemized their deductions.  They are likely to owe more taxes in April than in previous years. 

Other cases that could result in negative tax surprises are if you pay more than $10,000 combined in state and property taxes, have a home equity line of credit that you used for non-real estate purposes, or give moderately but not lavishly to charity in goods and cash.  If one of those descriptions covers your situation, it doesn’t mean that you owe taxes.  It means you should find out before this spring so you can prepare.

So how do you find out about your 2018 tax bill?  If you work with a professional tax preparer, it may be time to pay them a visit before they get busier as corporate and personal income tax extension deadlines loom.  If you prepare your own taxes, consider using the official IRS tax withholding calculator ( available at   It works well for most situations, with notable exceptions if you have significant rental income, or own all or part of a profit-making business 

Have your recent paystub(s) available, your 2017 tax return, and an understanding of how your income may differ from last year.  Once you estimate your 2018 taxes, you will receive guidance about filling in a new W-4 tax withholding form that can be turned into your employer to get you closer to owing nothing for your 2018 taxes.

David Gardner is a certified financial planner with a practice in Boulder County and can be reached with questions at or