Tax Bracket Changes

Servicemembers and their families are likely to fall into new tax brackets when filing their returns for 2018 - and it could result in some cash savings for some.

Republicans in Congress celebrated a major legislative win last week with President Donald Trump's signing of the Tax Cuts and Jobs Act Dec. 22. The changes keep the standard seven tax brackets, but the income rates for each - and most of the tax rates - are about to change.

Trump said last week that the typical family of four earning $75,000 will see an income tax cut of more than $2,000. “And that's - in my opinion - going to be less than the average,” he added. “You're going to have a lot more than that.”

Sen. Claire McCaskill (D-Mo.) a member of the Senate Armed Services Committee, disagrees. The Tax Cuts and Jobs Act should've done more for working families, she said, instead of the rich and powerful.

How real-world outcomes will shake out in years to come is still up for debate. Taxes are complicated, experts warn, and savings will depend on a host of factors like number of dependents, location, and deductions.

Here's a look at how some officers' tax brackets could change based on income, the new standard deduction - $12,000 for single taxpayers and $24,000 for married couples filing jointly - and marital status alone. “A taxpayer's marginal tax rate is the tax rate a taxpayer pays on their last dollar of taxable income,” said Cmdr. Patrick Kusiak, JAGC, USN (Ret), a tax attorney and former member of MOAA's board of directors.

  • A single ensign or second lieutenant with less than two years in who lives in San Diego and makes about $36,420 annually ($24,420 taxable income) will see their marginal tax rate drop from 15 percent to 12.
  • A married chief warrant officer five with more than 20 years in who lives near Quantico, Va., and makes $89,232 ($65,232 taxable income) will see their marginal tax rate drop from 15 percent to 12 percent.
  • A married lieutenant colonel based at Fort Bragg, N.C., who's served at least 16 years and makes just under $100,000 annually ($76,000 taxable income) also will see their marginal rate drop from 25 percent to 12.
  • A single major based in Hawaii who's served more than 12 years and makes about $86,000 a year ($74,000 taxable income) will fall into a new tax bracket of 22 percent. Under the old income bracket, they would've been in the 25-percent tax bracket.

Under the new plan, single filers who make less than $20,000 a year (less than $8,000 taxable income) still will see their taxable income taxed at 10 percent. Because most Americans make more than that amount, though, supporters say the bulk of the population will see their tax bills drop.

Editor's note: This article was updated to include clarification on marginal tax rates and remove incorrect savings projections.