It’s final. President Trump has signed a bill approved by the Congress to overhaul the U.S. tax system. And, it will take effect starting January 1, 2018. However, I am a bit irritated by the misinformation out there. Watching network TV would make it seem that the tax plan will increase everyone’s tax liability. But as usual, I delved a bit deeper into the facts behind the plan.
To find out what is really going on, I have compared the new and old tax brackets and the different deductions based on the new and old tax bills. We will go through these numbers and calculate what you would have paid through the old tax system versus the new tax plan. More specifically, we will look at a few scenarios. These include a single radiology resident making the median radiology resident salary with no kids; a married couple each making a median radiology resident salary; and a married couple each making a radiology resident salary with 2 kids.
Today, we are going to emphasize federal taxes alone since every state is different and most state taxes have not significantly changed. In addition, we will assume that most of you do not own a home (since that is the minority of residents!). And, we will say that you will pay off the maximum amount of deductible student loan debt. Finally, we will estimate that each resident makes the median salary of 54,378 dollars. (1) I bet you’re curious. So, let’s start with the calculations!
Single Resident, No Kids
For 2017, we used the turbo tax taxcaster software and the median radiology resident salary of $54,378. And, we are assuming that you are paying down the maximum student interest. With this information, your tax liability would be $6634 with a marginal tax rate of 25%.
For 2018, using the calcxml.com software and the median radiology residents salary, your tax liability would be $4,713 dollars with a marginal tax rate of 22%.
So, the truth would be a $1,921 decrease in federal taxes. Not too shabby!
Married Resident, No Kids
For 2017, we used the turbo tax taxcaster software and the median radiology resident salary of $54,378 for both spouses ($108,756). Again, we are paying down the maximum deductible student interest. This time your tax liability would be $13,372 with a marginal tax rate of 25%.
For 2018, using the calcxml.com software and the median radiology resident salary for both spouses, your federal tax liability would be $9,975 with a marginal tax bracket of 24%.
In this case, the decrease in taxes would amount to $3397, slightly less than double the amount for a single resident with no kids.
Married Resident, Two Young Kids
In this situation, we will assume that your children are getting childcare amounting to $5000 dollars per year. For 2017, the federal tax liability based on a median salary and maximum student deductible interest payments would be $8347. The marginal rate would be 25%.
For 2018, using the same software and the median radiology resident salaries, the total tax liability for the family would be $5975 with a marginal tax bracket of 24%.
For comparison, the decrease in taxes would total $2372. Also, much different than what the pundits will have you believe.
My Conclusions About Most Residents And The Tax Plan
For most residents out there, you will take home a small windfall, anywhere from $1921 to $3397, based on a typical radiology residency situation and assuming you maximize the student interest deduction. (To get the best tax deal you should take advantage of it!) Of course, a few radiology residents may not fare as well. For instance, if you own an expensive home or have a spouse that makes a lot of money, you may be in a special situation. But for the most part, you can ignore the pundits. You will do much better with Trump’s tax bill. Just another example showing that we all need to tune out biased media. It pays to check the facts and do the calculations on your own!
(1) https://www.glassdoor.com/Salaries/diagnostic-radiology-resident-salary-SRCH_KO0,29.htm
