As most of America gets ready to file taxes yet again, they are doing so under the Trump tax reform for the very first time. Although there was a lot of media focus on the bill during its debate and passage, it’s now been over a year since it became law, and plenty of Americans might be a little fuzzy on some of the details.
That’s why GOBankingRates conducted a survey of 501 Americans to quiz them on which 2018 tax law changes they don’t know. The survey included four different questions about portions of the tax reform bill, and the end result is pretty clear: Most Americans are in need of a refresher prior to filing their taxes. Overall, more than three out of four people surveyed failed the quiz, and only one question received a correct response from a majority of those polled. Here are some of the most important tax changes that you should be aware of before you file your taxes.
Take the Quiz: More Than 50% of Americans Passed This Tax Quiz — Can You?
Most People Don’t Know These 2018 Tax Law Changes (for Filing in 2019)
The quiz covered four questions:
- How much is the standard deduction for a single filer in 2019?
- How much is the penalty for not having health insurance in 2019?
- How many different tax brackets are there for tax filers in 2019?
- What is the highest tax bracket in 2019?
Each question reflects one major tax law change for this year’s filings, and multiple-choice answers were provided. Across the board, it’s clear that confusion remains about major details of the tax code. Assuming a passing grade means getting more than half the questions right, less than a quarter of those polled — 23.1 percent — succeeded in meeting that mark.
Questions one, three and four each had rates of correct responses under 20 percent, ranging from just one in 10 people knowing that there are seven different tax brackets to the 17.8 percent of people who correctly answered that the standard deduction is $12,0001.
|Survey Questions||Correct Answer||% of Respondents Who Answered Correctly|
|How much is the standard deduction for a single filer in 2019?||$12,000||17.8%|
|How much is the penalty for not having health insurance in 2019?||$0||51.7%|
|How many different tax brackets are there for tax filers in 2019?||7||10%|
|What is the tax rate for the highest tax bracket in 2019?||37%||12.8%|
Click to See: How the New Tax Law Changed My Approach to Deductions
On the flip side, nearly three times as many respondents — 46.1 percent — think that the standard deduction for a single filer is $8,000. That strong plurality doesn’t even fall on an answer that reflected the deduction prior to the tax reform bill, when it was $6,350. In fact, none of the four filing statuses (single, married filing jointly, married filing separately and head of household) had a standard deduction of $8,000 prior to the new GOP tax plan, making it all the more curious that so many people gave that same incorrect response.
Question two proved to be an outlier, with over half of respondents correctly noting that the repeal of the “individual mandate” — the tax penalty for not having health insurance — is one of the new tax law changes. Given how much controversy and media coverage that part of the Affordable Care Act sparked since its inception, this result doesn’t come as much of a surprise. However, it still didn’t stop nearly a third of respondents from incorrectly pegging the penalty at $20.
Younger Americans (Mostly) Know More About New Tax Law Changes
Some interesting trends crop up when you begin to separate results by age. On one hand, younger generations are generally more in tune with the changes included in the new bill as the age group that had the highest passing rate was older millennials ages 25 to 34. Of that group’s respondents, more than 27 percent of those who took the quiz received a passing grade. Meanwhile, the age group that performed the worst was the age 55 to 64 group that saw only 16.1 percent pass.
|Age Group||% of Respondents Who Passed the Quiz|
|65 and over||25.9%|
All three age groups under the age of 45 — 18 to 24, 25 to 34 and 35 to 44 — saw more than 20 percent of respondents receive a passing grade. Meanwhile, the 45 to 54 age group had a passing rate of 18.9 percent and the 55 to 64 group had the aforementioned 16.1 percent rate. That correlation between age and a lower passing rate suggests that older filers are having more trouble keeping up with the changes to the country’s tax law.
That is, up to age 64. That’s where the senior citizens taking the poll threw a major monkey wrench in that theory by posting the second-best rate of any age group. Over one in four respondents age 65-plus passed the quiz. That age group, clearly having lived through the most different changes to the tax code, still managed to beat out nearly all of the other younger generations.
Men Know Top Tax Rates Better Than Women
When considering gender, there didn’t appear to be a large difference in how well people understood the 2018 tax law changes. More than 24 percent of male respondents passed the quiz, compared to 21.8 percent of female respondents.
|Gender||% of Respondents Who Passed the Quiz|
However, digging deeper, there were some interesting differences in what men and women think the tax rates paid by those with the highest incomes are. Most notably, men are significantly more likely to be able to correctly identify the highest tax bracket of 37 percent, with 15.6 percent of male respondents answering the question correctly to just 9.8 percent of women. Almost the same percentage of men and women — 27.6 percent and 27.1 percent, respectively — guessed 40 percent, which was the answer closest to the country’s previous highest tax rate of 39.6 percent.
Why You Need to Know These Important 2018 Tax Law Changes
On the whole, as Americans begin filing their first returns under the new tax law, these results appear to indicate that many taxpayers are poorly informed. With just one in four able to answer basic questions about the differences between the previous and current tax laws, there seems to be a large section of the American public not ready to file their own returns.
That said, it could just be a sign of the times. With so many different ways to file for free and online, understanding the ins and outs of the tax code is arguably less important today than ever before. Even if you don’t know the size of the standard deduction or the rate for America’s top earners, many Americans will likely be able to plug their information into their preferred tax program and get a mistake-free return regardless of their familiarity with tax law.
Still, even though websites and widely available tax software might remove some of the necessity for knowing the current tax code, they don’t eliminate the utility. That knowledge can still play an important role when you’re preparing a budget or trying to plan around your expected tax refund. Staying in the dark about tax law basics will set you up for a potentially rude surprise when you file, or plan around a refund that doesn’t materialize.
Click through to learn about the most commonly missed tax deductions.
More on Taxes and Tax Laws
- 10 New or Improved Tax Credits and Tax Breaks for 2018
- Democrats Control the House — Will Your Taxes Change Again?
- The 70% Tax Rate for the Rich Explained (Even Warren Buffett Is on Board)
- Watch: The Most Important Tax Changes for 2019
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1 There’s always some confusion over which year is in question when referring to taxes because you file taxes for a specific year in the year following. In this case, the phrase “in 2019” is meant to refer to the filing year, which would mean it’s the “2018 tax year.” It is important to note, however, that the IRS issued an inflation adjustment to the standard deduction for the 2019 tax year — the taxes you’ll file in 2020 — that increases the standard deduction for single filers to $12,200.
Methodology: This survey was commissioned by Consumer Track and conducted by Survata, an independent research firm in San Francisco. Survata interviewed 501 online respondents on Jan. 22, 2019 and asked the following question: 1) How much is the standard deduction for a single filer in 2019? 2) How much is the penalty for not having health insurance in 2019? 3) How many different tax brackets are there for tax filers in 2019? 4) What is the highest tax bracket in 2019? Respondents were reached across the Survata publisher network, where they take a survey to unlock premium content, like articles and ebooks. Respondents received no cash compensation for their participation. More information on Survata’s methodology can be found at survata.com/methodology.