Join Early Retirement Today
Closed Thread
 
Thread Tools Display Modes
Preparing for higher taxes
Old 12-14-2017, 12:24 PM   #1
Recycles dryer sheets
ScaredtoQuit's Avatar
 
Join Date: Jan 2007
Posts: 211
Preparing for higher taxes

Unfortunately, the new tax bill will probably end up hiking taxes for people who itemize heavily and some people with large families. (due to the loss of exemptions) Especially vulnerable are those who make between $150K and about $400K. That includes me and I'm sure a large number of other people on this board. I am taking the following measures to postpone some of the pain for perhaps one more year:

I will pay my 2018 real estate taxes in advance during 2017 thereby creating a windfall on my 2017 tax liability. Since my 2018 real estate taxes will already have been paid, that will enable me to deduct state and local taxes one last time during 2018.

I already have an appointment for some periodontal work with my dentist in February 2018. I intend to make an estimated payment in advance for this work before the end of the year thus gaining one last medical write-off for 2017.

I have also considered the possibility of making some charitable contributions that I would otherwise have made during 2018 in advance (before the end of the year). However, as I think about it, I'm unlikely to actually do this because I'm going to be broke from advancing all of this other $$$

Any of you guys thinking about how to mitigate the impact of this coming tax hike?? I'd love to get some additional ideas.
ScaredtoQuit is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-14-2017, 12:31 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
I am going to wait to see what gets signed into law before I do anything. There are so many unsubstantiated rumors and outright lies about this bill that I think it is prudent to wait to see what gets signed.

Also I didn't think you could deduct medical care paid in advance of the tax year that you got that care:

Quote:
Payments for future medical care.
Generally, you can't include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. This rule doesn't apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier.
LOL! is offline  
Old 12-14-2017, 12:35 PM   #3
Recycles dryer sheets
ScaredtoQuit's Avatar
 
Join Date: Jan 2007
Posts: 211
Yes, I agree. But we'll probably know what's in it by next week. That only leaves about a week to act. Better to make plans NOW so that we can react in a very tight window of opportunity.
ScaredtoQuit is offline  
Old 12-14-2017, 12:35 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 11,701
Quote:
Originally Posted by ScaredtoQuit View Post

I already have an appointment for some periodontal work with my dentist in February 2018. I intend to make an estimated payment in advance for this work before the end of the year thus gaining one last medical write-off for 2017.
Sorry to hear you have such ongoing medical costs this year. The 7.5% or now 10% AGI minimum always disqualified me for the deduction.

As mentioned elsewhere, I'm using the DAF to bunch charitable contributions both this year, and in some future year.
JoeWras is offline  
Old 12-14-2017, 12:36 PM   #5
Recycles dryer sheets
 
Join Date: Nov 2017
Posts: 275
Perhaps you could calculate how much your federal taxes have been reduced by SALT deductions over the years, and then donate that amount to the Treasury to pay down the national debt.
43210 is offline  
Old 12-14-2017, 12:37 PM   #6
Dryer sheet aficionado
 
Join Date: May 2016
Posts: 42
We are in the same category, but since all of our houses now are rentals (military family) and since they are moving up the child tax credit phase out, increasing the child tax credit and providing a dependent credit (if it all goes through), then for the short term we will actually have at least $2000 in tax savings. Based on what I know of the proposals. So not bad for everyone- well for the short term at least, we do have to worry about chickens coming home to roost.
king smoothie is offline  
Old 12-14-2017, 12:42 PM   #7
Recycles dryer sheets
ScaredtoQuit's Avatar
 
Join Date: Jan 2007
Posts: 211
Quote:
Originally Posted by 43210 View Post
Perhaps you could calculate how much your federal taxes have been reduced by SALT deductions over the years, and then donate that amount to the Treasury to pay down the national debt.
Not nice. It is the policy of this Board to minimize political discord. My post is an honest attempt to solicit ideas for dealing with a pending tax increase.
ScaredtoQuit is offline  
Old 12-14-2017, 12:46 PM   #8
Recycles dryer sheets
 
Join Date: Nov 2017
Posts: 275
My comment is actually extremely nice. It gives a positive outlook to the situation. Think of the all those previous tax years as a fortuitous windfall that was a gift from society, and ask how you can give back.
43210 is offline  
Old 12-14-2017, 12:48 PM   #9
Recycles dryer sheets
ScaredtoQuit's Avatar
 
Join Date: Jan 2007
Posts: 211
Quote:
Originally Posted by JoeWras View Post
Sorry to hear you have such ongoing medical costs this year. The 7.5% or now 10% AGI minimum always disqualified me for the deduction.

As mentioned elsewhere, I'm using the DAF to bunch charitable contributions both this year, and in some future year.
Actually, my wife and I are pretty healthy. I have been deducting medical expenses for some time because I have a lifetime long term care policy. The policy is costing me about $18K per year but the premiums stop in another two years as the original deal was 10 annual payments for a lifetime of coverage. Between that premium and my regular healthcare premiums I always end up being eligible for a healthcare deduction.
ScaredtoQuit is offline  
Old 12-14-2017, 12:53 PM   #10
gone traveling
 
Join Date: Aug 2006
Posts: 994
.

I'm anxious to know if the final bill will eliminate the extra over age 65 standard deduction. The House bill eliminates it. The Senate bill retains it. Also there is a difference between the House and Senate version of the lowest tax rate. House = 12% / Senate = 10%


Hopefully, all the details of the final bill will be released tomorrow.


DEC. 14, 2017

" Republicans plan to unveil a final bill on Friday, with the aim of voting on the legislation early next week and delivering it to President Trump for signing before Christmas."

[...]

" Mr. Brady has scheduled a signing of the signature sheets for the conference report — which is the deal that’s been struck between the House and Senate lawmakers on the congressional conference committee — between 10 a.m. and noon on Friday. A majority of the House and Senate lawmakers who are on the conference committee have to sign affirmatively for the bill to move forward. "


https://www.nytimes.com/2017/12/14/u...-tax-bill.html

.
Helena is offline  
Old 12-14-2017, 01:07 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 11,701
Quote:
Originally Posted by ScaredtoQuit View Post
Actually, my wife and I are pretty healthy. I have been deducting medical expenses for some time because I have a lifetime long term care policy. The policy is costing me about $18K per year but the premiums stop in another two years as the original deal was 10 annual payments for a lifetime of coverage. Between that premium and my regular healthcare premiums I always end up being eligible for a healthcare deduction.
I see. That's better news than you guys having a lot of medical issues.
JoeWras is offline  
Old 12-14-2017, 01:25 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Jul 2015
Location: Beaverton
Posts: 1,382
I too am taking a wait and see approach. Many of the things that were to be taken away are back in the final proposal. Each person has their own decisions whether to pre-pay expenses for the following year, something that is printed every year about this time.

Since the mortgage deduction is back in up to $750k and a number of things have also been added at least in part, the affect lessens as the days go on.

More than anything I'm more upset about the lack of simplifying the tax code. I do volunteer taxes and the amount of crazy things written into the code is nutty in of itself. It is my belief that by raising the standard deduction maybe some people can be better off just with that in total than itemizing.

We'll see after the dust settles. Hopefully it's simpler than the ACA Act.
__________________
Jump in, the water's warm.
Bir48die is offline  
Old 12-14-2017, 01:36 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,361
Unless you are in the high brackets the child tax credit is as good or better than the old exemption. at the 38% bracket the 1600 tax credit is the equivalent of a 4200 dollar exemption. In the lower brackets it is the equivalent of a larger exemption. (Assuming the children are under 17). In the 25% bracket the 1600 is the equivalent of a 6400 exemption etc. So it primarily affects folks with kids in college more than those with younger children.
meierlde is offline  
Old 12-14-2017, 01:38 PM   #14
gone traveling
 
Join Date: Aug 2006
Posts: 994
Quote:
Originally Posted by Bir48die View Post

It is my belief that by raising the standard deduction maybe some people can be better off just with that in total than itemizing.

Under current IRS rules, in 2018, single seniors over age 65 will get $12,250 in tax exemption [$6500 standard deduction + $1600 extra over age 65 standard deduction + $4150 personal exemption]... so the tax plan's proposed Senate $12,000 / House $12,200 standard deduction is less. On top of that, the lowest tax rate is either increased [12% under the House plan] or stays the same [10% under the Senate plan.] But the Senate bill retains the over 65 extra standard deduction [the House bill does not.]

.
Helena is offline  
Old 12-14-2017, 01:45 PM   #15
gone traveling
 
Join Date: Aug 2006
Posts: 994
Quote:
Originally Posted by meierlde View Post


Unless you are in the high brackets the child tax credit is as good or better than the old exemption....

Apples and oranges.

The child tax credit does not compensate for the loss of adult exemptions.

Personal exemptions are indexed for inflation every year. Tax credits are not.

Under the new bill the index for inflation is calculated by "Chained CPI" which means even those items that are indexed for inflation will increase at a lower rate in the future.

.
Helena is offline  
Old 12-14-2017, 02:08 PM   #16
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,677
IMHO, political discussion should be healthy in FIRE, not degrading or insulting to either party. Both parties have done wonderful things for society. Plus, politics can affect whether or not we can FIRE. Almost everything to do with money is related to politics in some way. The only difference is we (FIRE) know how to budget!
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline  
Old 12-14-2017, 04:35 PM   #17
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
Folks, this is speculative for now since there is no actual bill so we're going to wait until there is one.
MichaelB is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Higher Taxes Loom for 401(k) Savers obgyn65 FIRE and Money 15 03-30-2011 10:07 AM
We were preparing for next year... Badger Hi, I am... 9 11-05-2008 07:14 AM
Taxes, Taxes. Taxes mickeyd FIRE and Money 1 02-09-2008 12:18 PM
Preparing for old age housing chinaco Life after FIRE 24 04-23-2007 07:09 PM
Preparing for this retirement! Mwsinron Other topics 7 08-22-2006 08:39 PM

» Quick Links

 
All times are GMT -6. The time now is 03:34 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.