The 2019 tax season is only a few weeks old, but Idahoans are already noticing some of the impacts of the biggest recent changes.

This is the first year that the Tax Cuts and Jobs Act, passed by Congress and President Donald Trump in 2017, will be fully in effect and impacts have already been reported. The Internal Revenue Service announced last week that the average tax refund was 8.7 percent lower than at the same point last year. People across the country who’ve traditionally received refunds have seen those completely vanish or noticed other unexpected changes.

Joshua Packer, an accountant with Poston Denny & Killpack in Idaho Falls for the last five years, has begun helping families and local businesses adjust to the federal tax code changes. He said that while he has a handle on the broad details of what will be different this year, the full ramifications will not be known until long after the April 15 deadline.

“It’s gonna be interesting in the next few years as they clarify the issues and regulations,” he said.

Exemptions and deductions

One of the biggest effects of the reform will be noticed by taxpayers as soon as they begin filling out their returns.

“There used to be two major levels to the start of the form — the personal exemptions and the standard deduction. That first level is gone now,” Idaho State University accounting professor Dave Bagley said.

The standard deduction that applies to all taxpayers doubled, going up to $12,000 for a single filer and $24,000 for a joint married couple. The personal exemptions, meanwhile, were a fixed amount that would be taken out for the filer and every dependent in their family. Those two changes apply to every taxpayer, but their specific impact will vary between families.

Last year, a couple with two children, filing jointly and making $70,000 per year would take out $4,050 four times, once for every person in their home, and then take out a standard deduction to drop their taxable income to $41,800. This year, that same family would lose those four exemptions but get double the deduction, leaving their net income at $46,000. Tax credits and changes later in the process can help close the gap, but the difference between those two numbers could be even more stark in other cases.

“If you have six or seven children, you might be in trouble because you lost all of those exemptions,” Packer said.

Impact by class

Not every change in the federal tax code will lead to an increase like that for Idahoans. The tax reform included a new $205 child tax credit for Idaho, a nonrefundable amount that applies after the taxable amount has been set. For lower-income families with several children, the credit and the standard deduction could more than make up for the loss of the exemptions.

That effect fits into the trend some tax experts have noticed among tax filings at this point. While the Tax Cuts and Jobs Act had been initially billed as a middle class tax cut, the bigger benefits so far have been felt by large lower-class families and wealthy business owners. Many middle-class families “have already experienced higher taxes this year,” Bagley said.

The tax rates for each bracket have been lowered across the board, giving most families a lower tax bill. However, the reform also changed the cutoff points for those and will result in more dramatic changes to those families on the edges. A person making $38,000 will see their tax rate cut in half from those new boundaries, while a person making $160,000 will have a 4 percent raise in their rate.

Effects for Idaho

The changes in refunds are also having an effect at the state level. The initial change reported by the IRS may not hold for the next few months, as more filings happen and more refunds are issued across the country, but Bagley expects the trend of lowered refunds to continue because of the new rules about withheld income. That change led to slightly larger paychecks throughout the year for many workers at the expense of their annual tax return.

“On a state level, their refunds have been smaller because they haven’t put as much money into the state pool,” Bagley said.

Simplifying the tax code also will lead to some changes. The Tax Cuts and Jobs Act set a maximum of $10,000 that could be deducted from itemized sections of the state income and property taxes, a cap that the majority of people will not need to worry about.

“In Idaho it’s probably not that big of a deal because our state taxes aren’t that high, but in California and New York it’s a much bigger deal,” he said.

In the past, itemized deductions also could have been used to replace the standard rate depending on which total ended up higher. Between the state cap and the doubled standard rate, though, most Idahoans will be able to skip all of their itemized forms and focus on the rest of their returns.

Packer said the effects of the changes will be felt differently by almost every taxpayer and most people won’t know the impact on them until they begin filing online or with a CPA.

“For a lot of these changes, it’s hard to say what will happen to everyone. It depends on your situation,” Packer said.