Workers are starting to see more take-home pay as employers implement the new withholding guidelines from the IRS, which dictate how much employers withhold from pay for federal taxes. Those whose checks have remained the same shouldn’t fret — employers have until Feb. 15 to make the changes.
Treasury Secretary Steven Mnuchin has estimated that the new rules will mean more take-home pay for about 90 percent of American workers.
According to the nonpartisan Tax Policy Center, a middle-income household would on average get a tax cut of $930 this year, lifting their after-tax income by about 1.6 percent. That increase won’t be perfectly reflected in their paycheck though.
That’s because lower tax withholding on paychecks is just a piece of a complicated set of changes to tax law that the GOP pushed through in December. And what your employer withholds is based on an estimate of your tax obligation that includes many complex factors, but it’s not a perfect measure.
No worker should anticipate a negative impact from the new withholding table if their pay remained the same, said Joseph Rosenberg, a senior researcher at the nonpartisan Tax Policy Center.