Federal Tax Cuts Delivered for us - your experience?

[ERD50]

Quote:

Originally Posted by retiredunder50 I personally witnessed an ugly effect of the new law. Like many others, I'm a volunteer who prepares taxes at the library. I had a 90 year lady who itemized for the 2017 tax year about $11.5K for property taxes, mortgage interest (yes, she still has a mortgage, actually 2), charitable contributions, and some medical that exceeds the threshold. She has a similar amount of deductions for 2018. She has a small pension and social security income streams. Her income amounts are practically identical for both years. For 2018 she is only qualified for the standard deduction of $13.6K. For the 2017 tax year, she got the personal exemption and her itemized deductions. Her 2018 Federal tax bill is a little more than $200 over her 2017 amount. Again, this is for a 90 year old with little income...

Does a $200 annual increase really merit a description of "ugly"?

It's hard to make anything of this w/o actual numbers, but yes, the combo of personal exemptions and itemized deduction limits will increase taxes for some people.

If she's paying $11.5K in property taxes, that's a sign to me that she lives in a pretty nice/upscale place. The "little income" comment doesn't tell the whole story.

-ERD50

[Alan]

Quote:

Originally Posted by ERD50 Does a $200 annual increase really merit a description of "ugly"? It's hard to make anything of this w/o actual numbers, but yes, the combo of personal exemptions and itemized deduction limits will increase taxes for some people. If she's paying $11.5K in property taxes, that's a sign to me that she lives in a pretty nice/upscale place. The "little income" comment doesn't tell the whole story. -ERD50

He said her total deductions were $11.5k, not just her property taxes. At least that is how I read the post.

[ERD50]

Quote:

Originally Posted by Alan He said her total deductions were $11.5k, not just her property taxes. At least that is how I read the post.

Ahhh, yes, that could be. Even so, w/o some breakdown, it's hard to tell. I can enter those sorts of numbers and come up with $500 lower tax for 2018. Because of the medical carve out for income, and SALT limits, you can't just reverse engineer the numbers.

If that poster saw a $200 reduction, would they have posted it? And said it was "beautiful"? Seems just as likely to occur, it's dependent on the sub-categories.

-ERD50

[JDARNELL]

Did he irs waive fees for underpayment this year due to the withholding tables being incorrect?

[jazz4cash]

Quote:

Originally Posted by Proteus126 Blue state guy (MD). Single earner, GS-15, $18k SALT each year, $11k mortgage interest, modest dividend and capital gains income. Taxes were about 7% higher this year than last, but a good bit of that was due to one-time capital gains events in 2018. So overall, the law had little effect, as anticipated. By MD law, I must use the same deduction method on both Fed and State. I ended up itemizing ($21k) on my federal taxes even though it cost me $600, because itemizing on State reduced MD taxes by $1200. Ideally, I would have used STD for FED, and Itemized for MD. At least one bill has reached the state house to decouple deduction methods. Looks like MD is going to get a big windfall this year, as loads of former Itemizers use STD.

I just finished my state taxes (MD). The FIT changes made it very confusing to use the free iFile program the state offers. I don't think any changes were made in response to the FIT revisions so the state gets a windfall. It was also not clear how to handle the SALT limitation and I nearly chipped in an extra $1k but I caved in and used the Block software. I itemized for both state and Federal using different deduction methods would be of no help to me. My Federal itemized deductions were just barely over the std deduction.

It sure wasn't any simpler than before.

[Jeb-NY]

It helped that we moved 4 years ago from the state that is part of my alias (high taxes and cost of living) to a state with low taxes and no income tax. I thought I had adjust my withholding to break even or maybe owe a little. Ended up with big refund. I have readjusted to hopefully breakeven or owe a little next year.

The big surprise was since this was the first year I have gotten a refund in many years, 10+, I eFiled for the first time. They promised 3 to 4 weeks for refund, got it in 5 days and that included a weekend.

[Just_Steve]

Quote:

Originally Posted by Jeb-NY It helped that we moved 4 years ago from the state that is part of my alias (high taxes and cost of living) to a state with low taxes and no income tax. I thought I had adjust my withholding to break even or maybe owe a little. Ended up with big refund. I have readjusted to hopefully breakeven or owe a little next year. The big surprise was since this was the first year I have gotten a refund in many years, 10+, I eFiled for the first time. They promised 3 to 4 weeks for refund, got it in 5 days and that included a weekend.

Filed on 2/10, refund has been a pending deposit in my checking since 2/14, it says deposit will be completed on 2/21. Totally surprised.

[UtahSkier]

Unexpected consequence of tax cut.

Here in Utah, there is a tax calculation that determines amount owed. From that number, there is a deduction based upon federal standard/itemized deductions. Since the federal standard deduction has increased significantly, the deduction amount has increased significantly.

So, my federal tax remains 0 while the state income tax was reduced 25%.

I think this consequence is also true for Arizona and other states as well.

[EarlyBirdly]

Quote:

Originally Posted by W2R Well, I *did* have two mugs of coffee instead of one this morning.... But it's just Maxwell House instant.

Careful....That's a "gateway coffee".

[W2R]

Quote:

Originally Posted by EarlyBirdly Careful....That's a "gateway coffee".

OK!!

[HFWR]

My effective rate dropped by 2%.

[aja8888]

Quote:

Originally Posted by ERD50 Does a $200 annual increase really merit a description of "ugly"? It's hard to make anything of this w/o actual numbers, but yes, the combo of personal exemptions and itemized deduction limits will increase taxes for some people. If she's paying $11.5K in property taxes, that's a sign to me that she lives in a pretty nice/upscale place. The "little income" comment doesn't tell the whole story. -ERD50

I hope when I am 90 I am still itemizing and paying taxes!

[Independent]

My calculation says that we saved $2,250.

If I put our 2018 income into the 2017 tax rules, we would have paid $11,000.
Our actual 2018 tax was $8,750.

Most of the gain came from replacing the 15% rate with the 12% rate. A smaller amount because the new standard deduction is a little higher than the (old standard deduction + personal exemption).

("2017 tax rules" includes an inflation adjustment on the brackets, standard deduction, and personal exemption.)

From a personal planning perspective, I think I'd be foolish to treat this as "found money". We'll lose more than that in the future due to the after effects of the higher deficit (higher taxes, reduced Medicare benefits or higher Medicare premiums, or higher inflation).

So the right thing is to put this year's tax reduction into savings.

[jazz4cash]

We E-filed for the 1st time ever. I gave up many years ago after many attempts to find and fix unspecified “info does not match” errors. This time the Bloch software pinpointed the issue so I was able to fix it and return was accepted by IRS. Now what?

[Jeb-NY]

Quote:

Originally Posted by Independent My calculation says that we saved $2,250. If I put our 2018 income into the 2017 tax rules, we would have paid $11,000. Our actual 2018 tax was $8,750. Most of the gain came from replacing the 15% rate with the 12% rate. A smaller amount because the new standard deduction is a little higher than the (old standard deduction + personal exemption). ("2017 tax rules" includes an inflation adjustment on the brackets, standard deduction, and personal exemption.) From a personal planning perspective, I think I'd be foolish to treat this as "found money". We'll lose more than that in the future due to the after effects of the higher deficit (higher taxes, reduced Medicare benefits or higher Medicare premiums, or higher inflation). So the right thing is to put this year's tax reduction into savings.

I'm sure the government will take it as a donation to lower the deficit

[Independent]

Quote:

Originally Posted by Jeb-NY I'm sure the government will take it as a donation to lower the deficit

If I could just persuade all the other taxpayers to do the same thing, I would.

[retiredunder50]

Quote:

Originally Posted by ERD50 Does a $200 annual increase really merit a description of "ugly"? It's hard to make anything of this w/o actual numbers, but yes, the combo of personal exemptions and itemized deduction limits will increase taxes for some people. If she's paying $11.5K in property taxes, that's a sign to me that she lives in a pretty nice/upscale place. The "little income" comment doesn't tell the whole story. -ERD50

The $11.5K was her total 2017 itemized deductions including property taxes, charitable contributions, mortgage interest and medical. (Had she been able to take itemized deductions in 2018, her increases in property tax, tithes, and medical minus the decrease in mortgage interest, would have given her about $300 more ==> $11.8K).


The little income is a fixed (No COLA) $17K pension and SS of $15K (I believe the 2018 SSA was around $15.4K)


The ugly descriptor for the $200 (or around 140%) increase in taxes due was appropriate after seeing this sweet 90 year old lady react to the news. It was clear to me that $200 means a lot more to her than probably most of us on this site. The good news is she had her previous taxes done by a paid preparer. At least she will avoid that prep fee as she will use our free services going forward.

[LuckyDog]

Effective tax rate = 4% lower this year...

[socca]

Any tax benefit I receive from the new law will be largely wiped out by the additional time needed to figure out how it applies to my situation (and the situation of my Partners and co-beneficiaries). Slap some value on my time (e.g. $50 / hour) and any tax benefit disappears.

On the positive side, the two tax prep software packages I use (H&R Block for a Partnership return; TurboTax for my personal return) seem to be on the ball regarding the new law. I have to sign 14 federal and state tax returns (8 prepared by me; 6 prepared by pros), so this time of year taxes are much on my mind.

[ziggy29]

I know I've been scarce for a couple of years; real life and other stuff have been weird. I think things are settled down now. That said, our experience....

Going into the start of early 2019, we thought the tax law changes would save us a bit. Not a heck of a lot since we were only in the 15% bracket before the cuts (and 12% now), but still....

Last year (part of the reason for craziness) my wife, who is a pastor, accepted a call on the north Oregon coast, leaving behind the heat, chiggers, scorpions and rattlers of Texas. We moved here last July.

Our church's treasurer, who is also a CPA, told us she discovered that the new tax law made our reimbursed moving expenses taxable. Ouch! That added $2,000 to our tax burden. Sure, moving forward it should result in lower taxes since that was a one-time hit. But this year? Oof.