In some respects, the 2018 tax year wasn’t that different from the year before, says Richard Rubin of The Wall Street Journal. According to new data from the IRS, 79% of taxpayers received refunds averaging $2,879 on their 2018 returns, Rubin reports, not far off from the 80% of taxpayers receiving refunds worth an average $2,908 for 2017.
But in other ways, the tax overhaul changed how important components of the tax system performed. Here’s are some highlights from Rubin’s analysis:
Tax liability fell for all income groups. “Overall, with 0.5% more returns filed through May 23, adjusted gross income rose 5%, reflecting the strong economy, wage growth and changes to what deductions are allowed,” Rubin says. “Tax liability dropped 6%.”
Tax penalties increased. Fewer people owed penalties for the 2018 tax year, thanks in part to a temporary easing of the rules, but those who did owe penalties paid more – 24% more compared to 2017, and that number will likely rise after late filings are processed in the fall.
More taxpayers claimed the standard deduction. The tax law nearly doubled the standard deduction and placed a cap on state and local tax deductions, reducing the benefit of using itemized deductions for many filers. About 90% of filers used the standard deduction for 2018, compared to 70% the year before.
AMT was much less prominent. Many upper-income households used to face the alternative minimum income tax, but the AMT “is virtually gone for households making under $1 million,” Rubin says. “For every 62 AMT payers in 2018, there is one in 2019.”