SALT LAKE CITY — Utah taxpayers may have a few adjustments to make regarding their personal income taxes under the new congressional tax plan. But the real impact may take a while to determine, analysts say.
Last month, the Republican controlled Congress passed major legislation making significant changes to the nation's tax laws. While GOP leaders in Washington have espoused the proposed financial virtues of the law on average Americans, local leaders are taking a more measured approach as they try to figure out the real-life ramifications of the new legislation in the Beehive State.
"On the personal income tax side, it looks like we may have more revenue," said Utah Tax Commission Chairman John Valentine. "But does that mean we're going to have more revenue (overall), we're still working on that."
He said middle- and lower-income earners may feel some effects of the new law under its current iteration. Changes could come this year if Congress determines adjustments are needed to improve the measure's long-term impacts.
Utah policymakers will also examine the law's effects on state revenues and make changes on state laws as needed, Valentine explained.
"We're trying to decide if this is going to be a net increase to Utah, a net decrease to Utah or is it going to be neutral?" he queried rhetorically. He said the state will convene a consensus committee composed of members from the Governor's Office of Planning and Budget, the Legislative Fiscal Analyst Office and Utah Tax Commission to determine the federal law's impact on Utah's budget forecast.
That forecast may take several weeks to develop as they wait for guidance from the Internal Revenue Service, which is in the process of reviewing the effects of the new tax law on existing legal standards. In the short term, he mentioned that the state will continue to utilize its current income tax withholding tables until after the 2018 legislative session in an effort to maintain clarity for taxpayers.
While congressional leaders heralded the new law as less complicated and easier to understand than previous tax laws, Valentine begged to differ.
"The tax law has not been made more simple," he said. "If one of the goals was to make it more simple, that goal was not achieved."
He attributed part of the reason for the less-than-optimal new legislation to the fact that it was passed without Democratic collaboration.
"Had it been bipartisan, it would have had less emphasis to change it," Valentine said. He also expressed concern about the potential for political realignment during the midterm elections in November, bringing the possibility of significant changes to the new bill that would result in even more confusion.
Because of the knowns, Valentine strongly suggested that individuals seek out help on their taxes in April.
"Make sure you get with a professional adviser if you don't have anything but a fairly standard return," Valentine said. "Professional advisers are going to be spending a lot of time learning the new rules."
Meanwhile, many tax professionals are already getting acquainted with the new laws and preparing for a challenging tax season. For the most part, local analysts and preparers acknowledge the new laws may help taxpayers bring home more money on the federal level, but the state impact could be different.
The tax commission suggested that the Utah "Average Joe" taxpayer could pay just over $200 more annually based on a $70,000 annual income with three children.
Dave McEuen, tax partner at Salt Lake accounting firm H.E.B. Solutions, said since the congressional tax law is federally based, its impact on individual states will probably be "small."
"If you just have a W-2 and (no major itemizations), you're not going to see much (difference)," he said. However, he noted that high-income business owners would likely see more benefit than most high-income or moderate-income wage earners.
For those making less than $200,000, he advised taking advantage of every deduction available where possible.
"(For instance, charitable) donations, home interest and property taxes," he said. "Make sure you're maxing out 401(k) (retirement plan contributions) and (Individual Retirement Accounts), which create (tax) deductions. Don't leave those on the table."
He also mentioned using health savings accounts for medical expenses for the tax break. By utilizing those deduction opportunities, taxpayers can help themselves the most, he added.
"You always want to take advantage — to the extent you can afford it — to 'max out' any of those things as a wage earner," McEuen said. "Those are going to be the biggest and easiest tax deductions for you."2 comments on this story
Because the new law doubles the standard deduction to $24,400, most taxpayers may not need to itemize, explained H.E.B. Solutions senior tax adviser Jim Hoch. That may offer a more simplified way to file income taxes this year, he said.
"A lot of people use the Schedule A (to itemize)," he said. "This won't even be an issue for them anymore to have to fill that out."
However, losing the individual deduction may impact larger families, while changes to the child tax credit for dependents under 17 could offset that loss, McEuen noted.
Overall, individuals and families will have to review their circumstances to determine what will provide the most benefit for their particular situation, Hoch said.