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Federal Tax Cuts Delivered for us - your experience?
02-07-2019, 12:19 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Federal Tax Cuts Delivered for us - your experience?
just finished preparing our 2018 taxes. all income and deductions are entered into Turbo Tax. results are a 3% decline in our effective tax rate between 2018 (15.5%) and 2017 (18.5%). not going to file right away...leaving some time for any "gotchas" to rear their ugly heads.
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02-07-2019, 12:36 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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I think it will depend on circumstances.
If I take 2017 income at 2017 and 2018 deductions, limitations and tax rates, my taxes would actually have been higher because of SALT limitations and the structure of my 2017 income which was skewed towards qualified income.
However, if I take 2018 income at 2017 and 2018 deductions, limitations and tax rates, my taxes are lower because of lower rates and more ordinary income than preferenced income.
OTOH, my aunt and uncle, whose income is mostly pensions and SS, are paying much less in tax in 2018.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-07-2019, 12:39 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Sep 2013
Location: Ventura County
Posts: 1,431
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Just out of curiosity - does the OP live in one of the "favored" states with a low or non-existent state tax. Those of us living where a high state income tax may not have quite as pleasant news coming.
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02-07-2019, 12:53 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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His public profile says that he lives in Illinois.... not a low tax state.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-07-2019, 12:58 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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For me it was relatively good news. The law doesn't look good however for the Federal deficit which I'm more concerned about than a couple of % lower personal taxes.
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Wild Bill shoulda taken more out of his IRA when he could have. . . .
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02-07-2019, 02:02 PM
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#6
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Full time employment: Posting here.
Join Date: May 2014
Posts: 977
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Quote:
Originally Posted by dtbach
For me it was relatively good news. The law doesn't look good however for the Federal deficit which I'm more concerned about than a couple of % lower personal taxes.
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My feelings exactly. As a nation, we are already spending a good percentage of taxes collected on servicing our huge debt. A few hundred $$ that I may save on my personal taxes is simply not worth the financial reckoning that is coming.
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02-07-2019, 02:16 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Quote:
Originally Posted by rk911
just finished preparing our 2018 taxes. all income and deductions are entered into Turbo Tax. results are a 3% decline in our effective tax rate between 2018 (15.5%) and 2017 (18.5%). not going to file right away...leaving some time for any "gotchas" to rear their ugly heads.
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Congratulations! I was never at that effective rate even when in the 33% marginal income tax bracket. I conclude that your income is BIGLY HUGE!
A 3% decline might be more than $30,000 in tax savings for the OP.
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02-07-2019, 02:17 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Jul 2015
Location: Beaverton
Posts: 1,382
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Quote:
Originally Posted by cbo111
My feelings exactly. As a nation, we are already spending a good percentage of taxes collected on servicing our huge debt. A few hundred $$ that I may save on my personal taxes is simply not worth the financial reckoning that is coming.
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Which is another thread unto itself.
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Jump in, the water's warm.
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02-07-2019, 02:19 PM
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#9
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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Quote:
Originally Posted by Bir48die
Which is another thread unto itself.
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Exactly.
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02-07-2019, 02:34 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Apr 2008
Posts: 1,245
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Quote:
A few hundred $$ that I may save on my personal taxes is simply not worth the financial reckoning that is coming.
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I think the IRS will probably accept additional $$$ over and above what is owed. And thank you for helping to reduce the deficit!
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02-07-2019, 02:55 PM
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#11
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Recycles dryer sheets
Join Date: May 2011
Location: Austin
Posts: 375
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OP, do you know why is the change? If using TurboTax, you can look at “tax history” to compare with last year.
I have about same income last two years. But effective rate goes from 18.72 to 15.08. All because I don’t trigger AMT this year.
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02-07-2019, 03:20 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,197
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No fed taxes for me and under old rules would have been more than zero.
As to the overall tax cuts......
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TGIM
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02-07-2019, 03:47 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Jul 2012
Location: Texas
Posts: 3,024
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It's complicated. The new standard deduction is lower than the sum of our prior deductions plus personal exemptions under the old law (on average). Previously, we bunched deductions every other year, mainly property tax. With the SALT limitation, bunching no longer makes sense. So it's highly unlikely that we will ever itemize again. However, 2018 was to be a non-bunching year. So for this year, the new standard deduction is actually higher than the standard deduction + exemptions that we would have taken under the old law. But still, on average, the new standard deduction is a negative going forward.
Interestingly, since we Roth convert to the top of the 12% bracket, there is no actual increase in taxable income as a result of the lower deductions, currently. But obviously, our conversions are lower, which will ultimately result in a larger tax torpedo at 70. So yes, it's complicated, but this part is definitely a negative. I chose not to Roth convert into the 22% bracket.
The main positive for us is lower rates on ordinary income (2 pensions and Roth conversions). That part is not complicated but also not a significant amount of savings, given our typical mix of ordinary and qualified. What IS complicated is whether we can take the new QBI deduction on our rental income. I was ready to do it, but the new guidance that just came out does not seem to be favorable to small-time landlords like me who spend less than 250 hours per year working in the "business."
Bottom line is a net positive, mainly from lower rates. Our last non-bunching year was 2016 and our income was almost same as 2018 (change was bracket increase only). Effective rate went down 2.6 percentage points.
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Retired at 52 in July 2013. On to better things...
AA: 85/15 WR: 2.7% SI: 2 pensions, SS later
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02-07-2019, 04:00 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Quote:
Originally Posted by stepford
Just out of curiosity - does the OP live in one of the "favored" states with a low or non-existent state tax. Those of us living where a high state income tax may not have quite as pleasant news coming.
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I'm in Illinois where state income tax is flat at 4.95% but Illinois is not exactly a low tax state. we're taxed on everything. the new gov wants to implement a "fair tax" meaning soak the rich-er but he won't define what "rich-er" means. the good news is that the change will require an amendment to the state constitution which likely...hopefully...won't be EZ.
the feds have done their job in reducing tax rates and as usual some tweaking might..will...be needed. residents in states with high SALT rates should be pressing the state legislatures to do the same.
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02-07-2019, 04:02 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Quote:
Originally Posted by dtbach
For me it was relatively good news. The law doesn't look good however for the Federal deficit which I'm more concerned about than a couple of % lower personal taxes.
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no argument but the feds take in plenty of cash. they need to get serious about actually cutting spending...not just a reduction in the increase...but actual cuts.
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02-07-2019, 04:05 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Quote:
Originally Posted by LOL!
Congratulations! I was never at that effective rate even when in the 33% marginal income tax bracket. I conclude that your income is BIGLY HUGE!
A 3% decline might be more than $30,000 in tax savings for the OP.
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depends on your definition of huge but it's not. not going to publish the actual numbers here but I calculated the effective tax rate by dividing taxable income by the total tax owed in both 2017 and 2018.
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02-07-2019, 04:05 PM
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#17
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 2,996
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Quote:
Originally Posted by pb4uski
His public profile says that he lives in Illinois.... not a low tax state.
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Very low tax state, no. But contrary to popular belief, Illinois is not a very high income tax state. They do get us for RE taxes and sales tax and...... RE taxes are subtracted from the Fed AGI . It is however a flat tax so low income people pay the same rate as high income people, assuming neither pays any RE taxes.
For a retired person collecting Pensions, SS, or any W/D from an IRA or 401K, there is zero income tax on those monies.
See here for where Illinois stands with 4.95% max rates compared to other states.
https://taxfoundation.org/state-indi...brackets-2018/
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02-07-2019, 04:07 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Quote:
Originally Posted by HillCountry
OP, do you know why is the change? If using TurboTax, you can look at “tax history” to compare with last year.
I have about same income last two years. But effective rate goes from 18.72 to 15.08. All because I don’t trigger AMT this year.
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we were better off itemizing last year; this year the new std deduction was much, much, much higher than our itemized list. I always enter all of the itemized deductions instead of just assuming. our TI dropped a tine bit this year since we resigned our part-time jobs.
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02-07-2019, 04:09 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,679
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My taxes rose 4% over what they would have been without the law change. The loss of the personal exemption hurts me more than the increase in the standard deduction and the rate reduction from 15% to 12%. Very little of my (ordinary) income is in the 15% bracket because nearly all of my income is either in the 10% bracket or is investment income (and more of it is subject to the unchanged 15% bracket).
I had been bunching my deductions off and on over the years because my itemized deduction hovered around the old standard deduction. No more itemizing.
While I lose Schedule A from my return, I do add 3 more pages (Schedules 1, 2, and 5). Schedules 2 and 5 will have exactly one number each, repeated once on each schedule. My return will now include 8 pages, hardly a postcard. I long for the old law and far simpler return.
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Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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02-07-2019, 04:11 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Dec 2018
Location: DuPage County IL
Posts: 2,697
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Quote:
Originally Posted by CRLLS
Very low tax state, no. But contrary to popular belief, Illinois is not a very high income tax state. They do get us for RE taxes and sales tax and...... RE taxes are subtracted from the Fed AGI . It is however a flat tax so low income people pay the same rate as high income people, assuming neither pays any RE taxes.
For a retired person collecting Pensions, SS, or any W/D from an IRA or 401K, there is zero income tax on those monies.
See here for where Illinois stands with 4.95% max rates compared to other states.
https://taxfoundation.org/state-indi...brackets-2018/
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yes, but the effective tax rate and actual taxes owed are still lower than they were last year. if IL suddenly started taxing pensions this year the result would be different but between the two years our income dropped a tiny bit (<1%) but our effective tax rate dropped 3%. we're happy.
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