Tax Bills

[SecondCor521]

Not surprised. Wells Fargo at least understood why I was asking the question, but they were still unable to answer.

@pb4uski, thanks for pressing them on it, and I'd be super happy if you can get an answer and share it here.

 

[bingybear]

It's a no win game trying to answer most of the question (for a bank or brokerage) about details of the tax bill. The bill could change or the IRS could implement rules that are somewhat different than how they guessed it would end up. Some things we will just have to wait on.

 

[jebmke]

It's a no win game trying to answer most of the question (for a bank or brokerage) about details of the tax bill. The bill could change or the IRS could implement rules that are somewhat different than how they guessed it would end up. Some things we will just have to wait on.

Much of the language is sufficiently vague already. Making any significant investment or other financial moves that are totally dependent on new tax rules is risky. I am making a big DAF donation of appreciated shares but there is no downside if the entire proposed tax law change unraveled completely.

 

[audreyh1]

Here's some news on the stock FIFO sales:

Dozens of House Republicans are pushing back against a provision in the Senate’s tax bill that would cause investors to pay millions of dollars more in taxes.

In a letter to Senate leaders on Thursday, 41 House Republicans urged the lawmakers to drop the first-in, first-out provision that would govern how investment gains and losses are taxed when an investor sells part of a position.

Dec 7, 5:57pm
https://www.wsj.com/livecoverage/tax-bill-2017

Thanks for sharing that news.

 

[Another Reader]

I see very little news about what is happening with the discussions and negotiations over these bills. Am I missing something? Did Congress go home on Christmas break and is everyone phoning it in? Or are there feverish negotiations going on in smoke-free back rooms and we will only hear about the result when the president is shaking hands with Congressional leaders in a photo-op?

 

[explanade]

I see very little news about what is happening with the discussions and negotiations over these bills. Am I missing something? Did Congress go home on Christmas break and is everyone phoning it in? Or are there feverish negotiations going on in smoke-free back rooms and we will only hear about the result when the president is shaking hands with Congressional leaders in a photo-op?

Their goal is to have a final bill by Xmas so that the law can take effect in 2018.

There may not be enough time to air what changes are made before they take the votes.

 

[Another Reader]

Their goal is to have a final bill by Xmas so that the law can take effect in 2018.

There may not be enough time to air what changes are made before they take the votes.

I was looking for the blow-by-blow analysis...

The stated goal is not meaningful. Lots of stated goals never get achieved. I'm interested in whether I should make certain financial decisions based on what will be in effect next year and executing before the end of the year. For example, I keep hearing there is movement on property and state and local taxes. If they break for Christmas on Christmas Eve, after the photo op, it's going to be difficult to get the bills paid and the orders placed by December 29th.

 

[ripper1]

I found this site helpful.
Tax Plan Calculator by Maxim Lott

maybe too simplistic for some.

The Standard Deduction, dropping the ACA requirement and giving a break on pass through llc, will all be big savings for me.

Interesting about family tax credit. In the tax plan calculator by Lott it shows me getting a 600 credit under the house plan even though my income is slightly over 100k and 0 children and dependents. I can't find this anywhere but it sure does help if it is true.

 

[pb4uski]

I see very little news about what is happening with the discussions and negotiations over these bills. Am I missing something? Did Congress go home on Christmas break and is everyone phoning it in? Or are there feverish negotiations going on in smoke-free back rooms and we will only hear about the result when the president is shaking hands with Congressional leaders in a photo-op?

The House and Senate have each approved similar but different tax bills. The bills are currently in conference committee where a small subset of representatives from the House and the Senate attempt to compromise the two bills into a single bill. The resulting bill wil be voted on by each body and if approved, will be sent to the president for his signature.

I doubt that we will be hearing much until the bills clear the conference committee.

 

[ripper1]

Interesting about family tax credit. In the tax plan calculator by Lott it shows me getting a 600 credit under the house plan even though my income is slightly over 100k and 0 children and dependents. I can't find this anywhere but it sure does help if it is true.

Oh,yeah, got it now.

 

[inmygardn]

It seems that charitable contributions will have less tax impact if you no longer itemize due to the elimination of certain other deductions. I was reading about the Schwab donor funds where you can prefund with highly appreciated stocks, not be subject to cap gains and get the deduction for the FMV of those stocks in the year in which you fund the account. Would a strategy make sense to say fund the account say every 5 years to get a big enough donation to itemize and then distribute to the charities annually from the fund?

 

[Brett_Cameron]

Here is a link to both the House and senate bills. H.R. 1 & S. 1
https://www.congress.gov/search?q={... and Jobs act"}&searchResultViewType=expanded

 

[gayl]

On MEET THE PRESS this morning they were discussing possibility of combining SALT & Property Taxes to max of 10k. If so, we will wind up about even. Anyone else hear of that (perhaps not on TV)?

 

[RunningBum]

It seems that charitable contributions will have less tax impact if you no longer itemize due to the elimination of certain other deductions. I was reading about the Schwab donor funds where you can prefund with highly appreciated stocks, not be subject to cap gains and get the deduction for the FMV of those stocks in the year in which you fund the account. Would a strategy make sense to say fund the account say every 5 years to get a big enough donation to itemize and then distribute to the charities annually from the fund?

Yes, it was discussed earlier in this thread, I believe, and I started a separate thread as the topic is not necessarily related to the tax bill. http://www.early-retirement.org/forums/f28/donor-advised-fund-89600.html

 

[SecondCor521]

It seems that charitable contributions will have less tax impact if you no longer itemize due to the elimination of certain other deductions. I was reading about the Schwab donor funds where you can prefund with highly appreciated stocks, not be subject to cap gains and get the deduction for the FMV of those stocks in the year in which you fund the account. Would a strategy make sense to say fund the account say every 5 years to get a big enough donation to itemize and then distribute to the charities annually from the fund?

Yes, it would, assuming that you're somewhat below the itemization threshhold without the charitable donation. It's similar to the existing practice of bunching deductions. I've read multiple reports of people setting up DAFs this year and making contributions for exactly this reason.

On MEET THE PRESS this morning they were discussing possibility of combining SALT & Property Taxes to max of 10k. If so, we will wind up about even. Anyone else hear of that (perhaps not on TV)?

I haven't, but I do know that those two deductions are different in the existing bills. I think they also are significant both in the impact they have on tax revenues as well as the impact they have on various people in various states. It would not surprise me at all if the end result is some mixture of the House and Senate versions, and it would not surprise me to see proposals floated in the media to see what the public reaction might be to various ideas.

 

[bingybear]

It seems that charitable contributions will have less tax impact if you no longer itemize due to the elimination of certain other deductions. I was reading about the Schwab donor funds where you can prefund with highly appreciated stocks, not be subject to cap gains and get the deduction for the FMV of those stocks in the year in which you fund the account. Would a strategy make sense to say fund the account say every 5 years to get a big enough donation to itemize and then distribute to the charities annually from the fund?

It really depends on your situation. I funded my DAF while working and in a high tax bracket. I've done some grants, but mainly let it grow. Now RE I am in a low tax bracket and it makes less sense to me while in a low tax bracket. YMMV.

We should be able to do QCD when we hit RMD time and use the standard deduction and have the QCD not counted as income.

If you are in a high tax bracket, then your situation may be different. Many people bunch deductions (like you are indicating) and it works well up to a point where giving is limited or AMT is applied (may or may not be in the final tax reform).

 

[RAchip]

If you are really rich, these tax bills will cost you. Most who make $1mm or more pay a ton of state and local income tax. And people in that category commonly own multiple homes and have very large property tax bills. My typical state/local income tax and property tax costs are well over $250k. Now I can only deduct $10k of that. And I get little or no actual tax rate reduction. I would be willing to live with this if they eliminate that estate tax, but it seems like that promise will go unfulfilled as well.

 

[pb4uski]

...My typical state/local income tax and property tax costs are well over $250k. Now I can only deduct $10k of that. ...

If you're looking for sympathy, I suspect that you have come to the wrong place.

 

[explanade]

If you are really rich, these tax bills will cost you. Most who make $1mm or more pay a ton of state and local income tax. And people in that category commonly own multiple homes and have very large property tax bills. My typical state/local income tax and property tax costs are well over $250k. Now I can only deduct $10k of that. And I get little or no actual tax rate reduction. I would be willing to live with this if they eliminate that estate tax, but it seems like that promise will go unfulfilled as well.

Estate tax would only affect your heirs and only if your estate is over $10.98 million.

Both plans will double that to around $22 million.

Rich will benefit in other ways, specifically business passthroughs and probably higher dividends and stock buybacks from corporations paying lower taxes.

Also no AMT for individuals any more.

 

[Sunset]

If you are really rich, these tax bills will cost you. Most who make $1mm or more pay a ton of state and local income tax. And people in that category commonly own multiple homes and have very large property tax bills. My typical state/local income tax and property tax costs are well over $250k. Now I can only deduct $10k of that. And I get little or no actual tax rate reduction. I would be willing to live with this if they eliminate that estate tax, but it seems like that promise will go unfulfilled as well.

Why would you not own a corporation that owns your properties and some investments. Then all the expenses like tax bills would be deducted against the profits of the company.

You could even rent out the properties while you are not using them, as surely they each must sit empty for many months at a time, a real estate company could handle the legwork so it would be pretty hands off, and really justify the deducting of property taxes, expenses, etc.

 

[RAchip]

"You could even rent out the properties while you are not using them"

I would NEVER let other random people live in any of my houses. I would sell them first.

"Why would you not own a corporation that owns your properties and some investments."

It just doesn't work. I would have to put many millions of investments in the corp and then getting the profit out would be taxed anyway.

 

[RAchip]

Estate tax would only affect your heirs and only if your estate is over $10.98 million.

Both plans will double that to around $22 million.

Rich will benefit in other ways, specifically business passthroughs and probably higher dividends and stock buybacks from corporations paying lower taxes.

Also no AMT for individuals any more.

I made most of my money before I got married so its only going to $11mm estate tax exemption for me and my estate will be several times that. [Mod Edit]

AMT may or may not be repealed.

 

[explanade]

They're going to raise the estate tax exemption AND keep step-up basis.

Your heirs will be fine.

 

[Another Reader]

The House and Senate have each approved similar but different tax bills. The bills are currently in conference committee where a small subset of representatives from the House and the Senate attempt to compromise the two bills into a single bill. The resulting bill wil be voted on by each body and if approved, will be sent to the president for his signature.

I doubt that we will be hearing much until the bills clear the conference committee.

And wouldn't we love to be flies on the conference room wall... They must have appointed the conferees on the basis of their ability to keep their mouths shut, as the leaks have been few, and not really substantiated.

 

[braumeister]

And wouldn't we love to be flies on the conference room wall...

Actually, it's the negotiations amongst the staffers that get the job done. The legislators just bless each compromise as it's done.

Political science cannot be an exact science.
-- Aristotle