If you’re an American adult, chances are you’ll be filing your taxes in the coming weeks (if you haven’t already!) That’s why we’ve compiled these common tax myths, because if you fall for any of these, it could come back to bite you.
Myth #1 The Individual Mandate for Health Insurance is Gone
Unfortunately, if you were uninsured in 2018 you’ll still pay a penalty when you file your taxes this year. Though it’s understandable if you thought otherwise. Just going by the headlines, you’d think the individual mandate was repealed for this year after the passing of the Tax Cuts and Jobs Act of 2017.
That’s only half-true.
While the Tax Cut bill DID repeal the penalty for the mandate, it doesn’t take effect until tax year 2019. So this year you can and will still be fined if you didn’t get insurance.
Myth # 2 You Can Lose Money By Getting in a Higher Tax Bracket
Wrong. This is a very common misconception, but it’s just not how tax brackets work.
In actual fact, everybody pays the same 10% rate on their first $9,525 under the 2018 federal income tax bracket. When you make your 9,526th dollar, you don’t start paying more for the money you already made. You only pay the higher rate on the additional dollar.
So while you do start paying more *on each additional dollar* when you get bumped into a higher tax bracket, the higher tax bracket never applies to the money you already made. In short, there is no way to lose money by making money–at least not through taxes.
Myth #3 If You Don’t Owe Taxes, You Don’t Have to File
This is a big one. Even if you don’t owe any money, you probably still have to file taxes. In fact, 44% of American households pay no federal income tax, but that doesn’t mean they don’t have to file. In reality, owing taxes has very little to do with whether you have to file. And while some people are exempt from the obligation to file taxes, you probably aren’t one of them if you have a job.
If you don’t file when you should, it WILL come back to haunt you. Penalties range from fines to criminal charges.