New IRS Filing Statistics Show Dramatic Changes Due to Tax Cuts and Jobs Act

The U.S. IRS has provided statistics on tax filings through 25 July 2019, showing dramatic changes from prior years due to the effects of the Tax Cuts and Jobs Act (TCJA).

The TCJA roughly doubled the standard deduction and limited some itemized deductions (for example, limiting the deduction for state and local taxes to $10,000).  The effect has been significant.  Through 25 July, more than 126 million taxpayers used the standard deduction, an increase from 98 million for the same period in 2018. Only 14.6 million returns were itemized, compared with 42.1 million in 2018.

Those 14.6 million itemizers claimed $156.9 billion in state and local tax (SALT) deductions. For the same period in 2018, 40.4 million itemizers claimed some $301.5 billion in SALT deductions.

The TCJA also had a dramatic effect on the alternative minimum tax (AMT) by raising the exemption amounts and the income phaseout levels. As of 25 July, only 78,328 taxpayers had filed AMT returns, as opposed to 4.07 million in 2018. AMT paid was down to $967.6 million from $21.7 billion. This is good news for the mobility industry, as many transferees were subject to the AMT in prior years, greatly complicating gross-up calculations.

As for refunds, average 2019 refunds in general ($2,879) were in line with those in 2018 ($2,908).  However, these numbers mask interesting effects at different income levels.  For example, refunds for those earning between $250,000 and $500,000 rose by 11%, while refunds for those earning $100,000 to $250,000 declined by about 10%. These income ranges are common for mobile employees, and illustrate the disparate effects that relocation departments are dealing with.

Finally, the TCJA significantly increased the child tax credit, and added credits for some dependents.  Not surprisingly, returns claiming these credits increased from 20.8 million to 36.6 million, with benefits claimed increasing from $25.2 billion to $75.8 billion.

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How This Will Impact Mobility

Individual tax changes have significantly impacted many mobile employees, both positively and negatively, and require close attention to gross-up policies. Fewer mobile employees were subject to the AMT, and many mobile employees fall into the income levels most affected by the changes.

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