Janus Henderson Releases Results of Proprietary Income Tax Study
15 April 2019 - 8:00PM
Business Wire
- Households with Incomes Over $100,000
Surprised by Larger Tax Bill –
- Debt Reduction Remains a High Priority Among
Filers -
Janus Henderson Investors released today the results of its
proprietary 2018 Income Tax Study. The firm undertook the survey of
1,002 U.S. adults during the week of March 25-29, 2019 to gauge
perceptions and attitudes regarding the 2017 Tax Cuts and Jobs Act
and its impact on 2018 individual tax returns.
Matthew Sommer, Senior Managing Director Strategy Group,
Defined Contribution and Wealth Advisor Services at Janus
Henderson, discusses the highlights:
“After hearing mixed feedback from our advisors and clients
regarding the impact of the 2017 Tax Cuts and Jobs Act, we decided
to gather feedback directly from taxpayers.”
“The data confirmed what we had been hearing in qualitative
feedback, which is that higher income tax payers ended up paying
more in taxes than they expected.”
“In addition, filers were uninformed about the tax changes,
which we believe presents an opportunity for financial advisors to
be more proactive in helping clients understand the new tax law and
individual implications.”
The five key findings specific to
respondents include:
Tax liability expectations were met, but disappointment
reigns among higher income households. Across the entire sample
representative of the U.S. population, respondents’ 2018 total tax
liability was on par with their expectations. In fact, when asked
to consider both amounts paid throughout the course of the year in
addition to any outstanding liability or refund, 32% expected to
pay more than 2017 but 30% actually incurred a larger tax bill than
in the previous year.
Households with incomes above $100,000, are likely to be
disappointed with their situation. Among this subsample of 254
respondents, 42% actually paid more in 2018, while only 36%
expected to incur a larger liability. On the other hand, 19% paid
less compared to 28% who thought their 2018 liability would have,
in fact, been lower. These discrepancies are most likely due, at
least in part, to the new $10,000 limitation on state and local
taxes. While all taxpayers benefit from five of the seven marginal
rates being reduced, higher income households with substantial
property and state income tax liabilities may find that the lower
rates are not enough to offset the new restrictions applied to
their itemized deductions.
Consumers are uninformed about the new tax law. Despite
being over one year removed from the passage the 2017 Tax Cuts and
Jobs Act, many consumers remain in the dark about the new tax law.
When asked “How familiar are you with the 2017 Tax Cuts and Job
Act?” on a scale of one (not familiar at all) to five (very
familiar), the average mean score was 2.05. An additional question
asked respondents how much they would be able to deduct if their
property tax was $4,000 and their state tax was $8,000. Only 10%
correctly answered $10,000.
Professionals could be more proactive. Use of an outside
professional was more prominent among higher income households, but
surprisingly some CPAs and advisors were not proactive about the
new tax law. Of higher income households who have a CPA or
financial advisor, roughly 22% and 42%, respectively, said their
professionals did not provide information to help them make the
most of the new tax legislation. This deficiency is an important
gap for CPAs and advisors to close, while perhaps serving as an
impetus for individuals to reconsider their service providers.
Cash is king when settling up with the IRS. Among higher income
households with an outstanding tax liability, more than half (56%)
will withdraw money from a checking or savings account to cover the
balance. For households with income less than $100,000 and who are
receiving a refund, 38% plan to save the money while 23% will spend
it.
Reducing debt is a top priority in 2019. Across the
entire sample, when asked to choose from a list of common financial
priorities, reducing debt was most often selected (22%). The other
top priority for 2019 is to establish an emergency fund (15%).
Interestingly, these choices were also the top selections by higher
income households. These results are a good reminder that a solid
financial plan is much more than simply asset allocation or
investment selection.
Tax information contained herein is not intended or written to
be used, and it cannot be used by taxpayers for the purposes of
avoiding penalties that may be imposed on taxpayers. Such tax
information and any estate planning information is general in
nature, is provided for informational and educational purposes
only, and should not be construed as legal or tax advice.
About Janus Henderson
Janus Henderson Group (JHG) is a leading global active asset
manager dedicated to helping investors achieve long-term financial
goals through a broad range of investment solutions, including
equities, fixed income, quantitative equities, multi-asset and
alternative asset class strategies.
Janus Henderson has approximately US$329 billion in assets under
management (at 31 December 2018), more than 2,000 employees, and
offices in 28 cities worldwide. Headquartered in London, the
company is listed on the New York Stock Exchange (NYSE) and the
Australian Securities Exchange (ASX).
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Press EnquiriesTaylor
Smith1-303-336-5031taylor.smith@janushenderson.com
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