Release of final tax bill details

[gerntz]

What's funny is that we're delaying our 2017 prop tax payments till 2018 because even with bunching, we won't reach $10K in prop & state income taxes in 2018, & without bunching in 2017 or 2018 we're better off with the std. deduction both years. Net, we'll still get full benefit in 2018. Also delaying medical expenses since the 7.5% AGI limit will be in effect in 2018 also. Of course taking std. deductions in 2017.

 

[athena53]

I'm finding this thread very helpful!

Unhappy to lose some of the deductions I've had up to now, and the lower tax rates don't offset the lost deductions and the loss of the personal exemption. I also realized that there's no advantage for me to "bunch" my exemptions into a single year. The ones I can't time easily (state taxes, property taxes and mortgage interest) alone add up to more than $12,000. (I'm filing as Single.) It's also a crapshoot figuring which year is a better year to have deductions since my taxes are driven so much by investment results.

Bottom line: looks like my Federal Taxes for 2018 would be $2,500 more than 2017 if I had the same investment results. Tolerable, but a surprise given all the clamor about how millionaires are getting big tax cuts.

My state, if it doesn't change its formulas, will get a few bucks extra due to the lost Federal deductions. I'm guessing they'll take the money and run.

 

[ER604me]

Thank you

Yes, if I understand it correctly, you just got a 20% pass-through business income tax cut on your income tax bill PLUS the business' income tax rates went down. This should be a huge tax decrease for you. See the pass-through business section of the linked Kitces article.

My understanding was that the 20% reduction did not apply to professional service firms including architects and engineers. Also being an S-Corp I don't pay business taxes since all earnings flow thru to me on my individual return. I'll reread the Kitces article.

 

[gerntz]

I'm finding this thread very helpful!

Unhappy to lose some of the deductions I've had up to now, and the lower tax rates don't offset the lost deductions and the loss of the personal exemption. I also realized that there's no advantage for me to "bunch" my exemptions into a single year. The ones I can't time easily (state taxes, property taxes and mortgage interest) alone add up to more than $12,000. (I'm filing as Single.) It's also a crapshoot figuring which year is a better year to have deductions since my taxes are driven so much by investment results.

Bottom line: looks like my Federal Taxes for 2018 would be $2,500 more than 2017 if I had the same investment results. Tolerable, but a surprise given all the clamor about how millionaires are getting big tax cuts.

My state, if it doesn't change its formulas, will get a few bucks extra due to the lost Federal deductions. I'm guessing they'll take the money and run.

I thought mortgage interest deduction wasn't affected if your current mortgage is less than $1M. As for the state/local/property taxes, one of the purposes of the law is to reduce the Fed Gov subsidizing high ones.

 

[athena53]

I thought mortgage interest deduction wasn't affected if your current mortgage is less than $1M. As for the state/local/property taxes, one of the purposes of the law is to reduce the Fed Gov subsidizing high ones.

I know- my mortgage interest and state, local and property taxes are low enough that I can still deduct them. Most of the increase in my taxes is due to the loss of the personal exemption and the increase in the Standard Deduction. The latter would sound like a good thing, but it means that my deductions in excess of the Standard decrease compared to 2017, and the reduced tax rates don't make up for it in my case.

 

[pb4uski]

.....Bottom line: looks like my Federal Taxes for 2018 would be $2,500 more than 2017 if I had the same investment results. Tolerable, but a surprise given all the clamor about how millionaires are getting big tax cuts....

I'm surprised too. I do 6 returns and took a quick look at the impact for each yesterday... all saved except for me... and in some cases the savings were substantial..... but my increase was negligible.

 

[kramer]

My understanding was that the 20% reduction did not apply to professional service firms including architects and engineers. Also being an S-Corp I don't pay business taxes since all earnings flow thru to me on my individual return. I'll reread the Kitces article.

From the kitces article

(Notably, a last-minute change to the legislation explicitly excluded engineers and architects from these limitations, preserving the QBI deduction for those professional fields.)

And whether or not engineering had achieved this carve out, my understanding is that you still would have received the deduction on the original 157,500/315,000 single/married , the special carve out I have highlighted is about income that is higher than that. Applies to S Corps and sole propietorships, etc.

Also, now that I think about it, this reduces pass-through *income* by 20%. That should mean that total taxes are reduced by more than 20% since you would be losing marginal income in higher brackets.

Again, this needs to be carefully studied, I am not making blanket or authoritative statements here. Hopefully, others will chime in. I am very interested if others who are knowledgeable agree or disagree with my statements here.

 

[USGrant1962]

I'm surprised too. I do 6 returns and took a quick look at the impact for each yesterday... all saved except for me... and in some cases the savings were substantial..... but my increase was negligible.

Per the Tax Policy Center only about 5% of taxpayers will see a tax increase next year. I suspect that is mostly single filers, with above-average income, in SALTy states.

 

[kgtest]

Per the Tax Policy Center only about 5% of taxpayers will see a tax increase next year. I suspect that is mostly single filers, with above-average income, in SALTy states.

I do believe you nailed it. Let's not talk about the expiration date on these

 

[gayl]

Even if you pay ahead, it will only help for one year.

+1

Ran DS, DD, GS1, my proposed returns ... only DS lost but the loss was lessened once SALT + Property Taxes to 10k was added into bill.

 

[geeky_grrl]

I would have been hit pretty hard if I hadn't retired already. I think my taxes will be a wash but my SO is looking at about a $10k increase with the new tax bill. The SALT limitation is painful and marginal rates are higher under the new law between $200-425k.

Maybe a giant tax increase will be enough incentive for him to quit.

 

[Helena]

.

House passed the tax bill today. Then the Senate noticed a violation that had to be removed. So the Senate will vote on the tax bill tonight and send it back to the House again tomorrow for another vote.

House to revote on Trump, Republican tax reform bill due to Senate Byrd rule - Business Insider

House just now passed the tax bill and it will be on the way to President Trump to sign it into law... which I understand will be at 3pm today.

.

 

[Katsmeow]

I thought mortgage interest deduction wasn't affected if your current mortgage is less than $1M. As for the state/local/property taxes, one of the purposes of the law is to reduce the Fed Gov subsidizing high ones.

One of the issues for many people is that while mortgage interest deduction and SALT are still deductible (below a certain level), that is meaningless unless you have enough total deductions to make itemizing worthwhile. A lot of people who used to itemize will no longer be itemizing due to the increase in the standard deduction (coupled with getting rid of personal exemptions).

 

[scrabbler1]

Who among you expect to be able to downgrade to a simpler 1040 tax form starting in 2018 (or, perhaps, 2019) after this tax reform law goes into effect? That is, using one of the shorter forms (1040A or 1040EZ) instead of the long form, 1040.

I have had to use Form 1040 if I either itemized my deductions and/or needed to file Schedule D due to making at least one sale of mutual fund shares outside my IRA. There was one year a few years ago when I did neither of those things so I was able to switch to Form 1040A.

Seeing the chances of itemizing my deductions shrinking to nearly zero after 2017, only needing to file Schedule D would force me to use Form 1040 instead of Form 1040A.

Do any of you expect to be as fortunate?

 

[athena53]

Per the Tax Policy Center only about 5% of taxpayers will see a tax increase next year. I suspect that is mostly single filers, with above-average income, in SALTy states.

Other than the SALTy state part, that would be me. Darn glad I don't live in NJ anymore.

 

[Helena]

Who among you expect to be able to downgrade to a simpler 1040 tax form starting in 2018 (or, perhaps, 2019) after this tax reform law goes into effect? That is, using one of the shorter forms (1040A or 1040EZ) instead of the long form, 1040.

I have had to use Form 1040 if I either itemized my deductions and/or needed to file Schedule D due to making at least one sale of mutual fund shares outside my IRA. There was one year a few years ago when I did neither of those things so I was able to switch to Form 1040A.

Seeing the chances of itemizing my deductions shrinking to nearly zero after 2017, only needing to file Schedule D would force me to use Form 1040 instead of Form 1040A.

Do any of you expect to be as fortunate?

As I have done the past couple of years, I plan to stay under the IRS filing threshold.

Thankfully this tax bill increases my tax threshold $1350 in 2018 [$13,600 total.] So I can take that much more out of my IRA account tax free.

 

[Texas Proud]

House just now passed the tax bill and it will be on the way to President Trump to sign it into law... which I understand will be at 3pm today.

.

From what they said on TV, it is only a speech and get together to backslap at 3PM... he is going to sign at a different time...

But, who knows what will happen when the time comes...

 

[Another Reader]

From what they said on TV, it is only a speech and get together to backslap at 3PM... he is going to sign at a different time...

But, who knows what will happen when the time comes...

Wake me when it's signed so I can go online and pay the second installment of the property taxes...

 

[gerntz]

One of the issues for many people is that while mortgage interest deduction and SALT are still deductible (below a certain level), that is meaningless unless you have enough total deductions to make itemizing worthwhile. A lot of people who used to itemize will no longer be itemizing due to the increase in the standard deduction (coupled with getting rid of personal exemptions).

So people who won't be able itemize because std deduction increased come out ahead, correct? And everyone loses the personal exemption, right?

 

[W2R]

I haven't been itemizing because I don't have enough deductibles to make it worthwhile. I don't know but I am hoping that with the higher standard deduction, I might be one of those paying less taxes. I haven't checked. Either way I'll pay whatever I owe.

There are two possibilities:
If it's more, I'll scream about it all over the internet.
If it's less, I'll be doing the happy dance all over the internet.

Guess I've got this figured out!

 

[catotx]

Wake me when it's signed so I can go online and pay the second installment of the property taxes...

This might happen only next year. As reported on WSJ

"House Majority Leader Kevin McCarthy (R., Calif.) suggested Wednesday that President Donald Trump could wait until January to sign the tax bill into law.

“There are some businesses that have asked for the fourth quarter to be complete," Mr. McCarthy told reporters Wednesday, opening the door to a signing next year. “It all depends when it goes to him."

A December signing would send finance teams in corporate America scrambling to calculate the new law’s effect on their balance sheets and income statements. U.S. accounting rules require companies to reflect the impact of the new law on their books in the quarter it is signed by the president, even if those measures go into effect at a future date, experts said.

A January signing allows accountants more time to compute the impact of the rules before companies report it in their first-quarter financials."

 

[FANOFJESUS]

I saw on tv that folks under 100k a year should gain. That would be most of the folks on here.

 

[ExFlyBoy5]

I haven't been itemizing because I don't have enough deductibles to make it worthwhile. I don't know but I am hoping that with the higher standard deduction, I might be one of those paying less taxes. I haven't checked. Either way I'll pay whatever I owe.

There are two possibilities:
If it's more, I'll scream about it all over the internet.
If it's less, I'll be doing the happy dance all over the internet.

Guess I've got this figured out!

We are in the same boat as you: haven't itemized since DW got out of real estate sales. I did some "manual math" and figured that we will save about $1,200 a year; so pretty happy about that.

I only wish that one day the tax code will actually be made SIMPLER, not more complex.

 

[donheff]

Per the Tax Policy Center only about 5% of taxpayers will see a tax increase next year. I suspect that is mostly single filers, with above-average income, in SALTy states.

That sounds about right. I thought we would be paying a bit more but it looks like it will be a bit less.

 

[pb4uski]

This might happen only next year. As reported on WSJ

"House Majority Leader Kevin McCarthy (R., Calif.) suggested Wednesday that President Donald Trump could wait until January to sign the tax bill into law.

“There are some businesses that have asked for the fourth quarter to be complete," Mr. McCarthy told reporters Wednesday, opening the door to a signing next year. “It all depends when it goes to him."

A December signing would send finance teams in corporate America scrambling to calculate the new law’s effect on their balance sheets and income statements. U.S. accounting rules require companies to reflect the impact of the new law on their books in the quarter it is signed by the president, even if those measures go into effect at a future date, experts said.

A January signing allows accountants more time to compute the impact of the rules before companies report it in their first-quarter financials."

Makes sense. Deferred income taxes are based on stautory tax rates... I can see that wit the signing being so late that it might throw some chaos into corporate year ends (and quarter ends for fiscal year companies). But I would think that the net impact will be quite positive as deferred tax liabilities previously computed based on 35% are recomputed at 21%.... so all else being equal a $1 billion deferred tax liability will become $600 million, releasing $400 million to earnings and equity. That's a big deal.