Refund Check Looking a Lil Light? Here’s Why

Written on 04/17/2024
Jamaal Benner

Your tax refund might be looking a little skinny this year, and if you’re trippin’ about where that extra cash dipped off to, you’re in the same boat with a bunch of other folks. Let’s break it down real quick. Back in late 2017, when Trump was President, he rolled out this big ol’ Tax Cuts and Jobs Act (TCJA) that’s still messing with our pockets today.

So here’s what went down with the changes:

The TCJA beefed up the standard deduction like crazy. For singles, it shot up from $6,350 to $12,000. This was about making life easier, cutting down the number of people needing to itemize deductions, which means less paperwork but also less money back come tax season.

But here’s the kicker—they axed personal exemptions. You used to get to shave off $4,050 for you and anyone you’re claiming, right off your taxable income. That’s gone now, and yeah, it’s biting into some refunds for sure.

And for the homies living in places where the taxes are high? There’s this new cap— $10,000 max on what you can deduct for your state and local taxes (that’s the SALT cap). So if you’re living somewhere like D.C., where taxes aren’t exactly low, you’re feeling that pinch.

Let’s roll with Alex from D.C., in a hypothetical scenario. Alex is a graphic designer who earns $70K a year. Before this TCJA business, Alex was living good on those deductions—state, local, personal exemptions, all that. Nice refund at the end of the year. Now, even though Alex is taking home a bit more each month because the IRS isn’t holding as much, when tax time rolls around, that refund isn’t what it used to be.

Here’s the silver lining:

A smaller refund doesn’t always mean you’re paying more to Uncle Sam. It could be a sign that your withholdings are just tighter now, matching up better with what you really owe. So for Alex, it means more money on hand all year instead of loaning it to the government for zero interest.

Looking ahead, you might want to consider how you handle your withholdings—maybe you tweak them if you really miss that big refund, or maybe you roll with the bigger paycheck vibe and adjust your budget accordingly. Getting your head around these TCJA twists can help you plan better and might soften the blow of a leaner refund.

All in all, while the tax game has changed in terms of how and when we see our money, the total amount we cough up? Not so much. It’s all about adjusting to the new rules and making sure you’re set for the next round. Plan ahead!