Tax Return trouble for large Utah families following Federal changes

Posted at 6:16 PM, Feb 19, 2019
and last updated 2019-02-19 22:54:57-05

Utahns have always been demographically unique, largely because of the fact that a majority of residents belong to the Church of Jesus Christ of Latter Day Saints.

Large families, and a church that asks members to give 10 percent of their income in tithing both add up to tax liabilities after tax changes in Washington.

Those large families have benefitted in the past from a personal exemption just over $4,000.00. That means for every member of the family, including parents and dependent children, the family could subtract that amount from their taxable income.

To oversimplify: a family earning $50,000.00 with four children at home would get $24,000.00 in exemptions, making their taxable income $26,000.00.

That is not the case this year. In place of the personal exemptions, the federal government is giving parents beefed-up child tax credits of about $2,000 per-child, phased out for very high-income earners.

Credits are a great deal, directly subtracted from your tax bill.

The problem? The state of Utah bases their taxes on federal calculations of taxable income.

That means that Utah family earning $50,000 would be taxed on the full amount in terms of state taxes, without the benefit of those generous tax credits.

The state made small adjustments, reducing income tax from 5 percent of income to 4.95 percent. It's not enough to compensate for the dramatic increase in the taxable income of large families.

State lawmakers are aware of the issue and may make adjustments, but they wouldn't go into effect for returns being filed this winter and spring.

As for charitable giving, faithful members of the Church of Jesus Christ of Latter Day Saints have typically gotten large itemized deductions because they give 10 percent of their income in a tithe.

Those itemized deductions won't kick in for most Utahns this year and beyond because the standard deduction available to everyone has nearly doubled from $12,700 to $24,000.

Taking the standard deduction still helps taxpayers' bottom lines, but it might hurt the charities themselves by taking away an incentive to give.