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Old 11-02-2017, 03:49 PM   #61
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tax plan

Yes - of course, we will see how it ends up in the end. I'm all for a simpler system but wish we wouldn't increase the deficit... Anyways -

A couple things jumped out at me beyond some of the obvious/ major changes in brackets/deductions/etc (I have trouble understanding the legalize of the actual bill)

1) elimination of medical savings account? - sounds like others have said that does not include HSA?

2) change in capital gains exemption for primary residence. not only are 5 out of 8 (instead of 2 out of 5 )years of residence now required, but there is a phase out for single people income's over $250,000. Obviously, not an issue for many/most. But definitely a hit for some upper middle class/rich

4)? change in deferred compensation - I haven't found much on this, but it seems to me that 457 plans might be basically going away because they will be taxed as soon as "vested" - which seems to be not necessarily at the end of employment- not sure I understand that one - so please feel free to enlighten me if anyone read this part and understood it....
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Old 11-02-2017, 04:01 PM   #62
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The more I read that bill, and the MSA/HSA stuff, the more worried I am about the HSA part of it. I just can't parse it.
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Old 11-02-2017, 04:02 PM   #63
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According to Forbes HSA accounts as they stand are not changed by this bill.
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Old 11-02-2017, 04:43 PM   #64
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One thing I have not seen mentioned is the NUA rule for at least 401ks which applies to the stock of the company you work for, where if the stock has appreciated in the 401k you can just pay regular taxes on the initial amount and then pay capital gains on the increase in value. this of course tends to be biggest for folks in startups. Evidently in the 2014 proposal it was done away with not sure about todays.
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Old 11-02-2017, 05:42 PM   #65
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Been looking at the Capital Gains language.

It appears they are reducing the 0% bracket for MFJ from 83,400 to 77,200.

A 6,200 lower of the threshold that will cost everyone an extra 930 a year. A nice little grab directed lower income payers.
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Old 11-02-2017, 05:52 PM   #66
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Quote:
Originally Posted by ace8 View Post
Been looking at the Capital Gains language.

It appears they are reducing the 0% bracket for MFJ from 83,400 to 77,200.

A 6,200 lower of the threshold that will cost everyone an extra 930 a year. A nice little grab directed lower income payers.
With a standard deduction of $24K isn't it effectively higher?

I think if you add up 77,400+13,000+4,150*2 under the old
versus 77,200+24,000 under the new, you'll get a higher effective threshold under the new.

I'm getting $98,700 under the old for 2018, and $101,200 for the new.

And notice that within that threshold you are paying 12% on your ordinary income including short term capital gains plus 0% on your long-term cap gains. Cross the threshold and you are still paying 12% on ordinary income including short-term cap gains still up to $90,000+$24,000 and 15% on long term cap gains.
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Old 11-02-2017, 06:23 PM   #67
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With a standard deduction of $24K isn't it effectively higher?
That would seem to depend if you itemize or not. And also if you have more than 2 exemptions.

I should also add the draft has the standard deduction at 24,400.
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Old 11-02-2017, 06:27 PM   #68
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Did some preliminary math and it is not looking good. A lot of unknowns but removing personal exemptions (I have kids) is going to be very bad.

I am looking at 70% increase in federal income tax.

[mod edit]
Yes, I did the math and OUCH.

Yes the standard deduction goes up 12k but personal exemptions go away. So the loss of personal exemptions will hit families that itemize HARD, much harder than the loss of SALT. Wonder if they thought of families at all
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Old 11-02-2017, 06:53 PM   #69
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That would seem to depend if you itemize or not. And also if you have more than 2 exemptions.

I should also add the draft has the standard deduction at 24,400.
OK so add $400.

Under the old plan you're going to itemize perhaps if it gets you better than $13,000, just like you might with the new plan to exceed $24,400,

But for comparison sake let's stick with the 2 couple household, standard deduction scenario.

For larger households still using standard deductions plus exemptions someone can do the comparison.
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Old 11-02-2017, 07:13 PM   #70
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I guess I can't get too excited about the whole thing in that there is nothing much I can do about it. I figure that I'll either get about $1000 or pay an extra $1000 on my little stash. [mod edit]
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Old 11-02-2017, 07:24 PM   #71
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Feel free to do your math. If things work out better for you, great I am happy for you.

I did the math for my family. Took the time to read this lawyer markup nonsense to try and understand and apply their proposal to my situation.

My current best guess is the net is an increase my tax due after credits of 291%. Keep in mind we are talking about tax reform that was promoted and I'll use the title from the draft house bill...

"Tax Cuts and Jobs Act"

Keep in mind, I am doing this math for a middle class family in a high tax state with moderate COL. We will never sniff the top of the proposed 25% bracket and don't even dream of the top of 35% bracket 1M

I did something today that I have not done since I was a kid applying to military academies ... wrote my senators ... suffice it to say the tone of the letter was a bit different.
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Old 11-02-2017, 07:27 PM   #72
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Looks like we would've paid about 7% more on last year's income with this proposal. Ouch! Next year will be worse. I figure a big hit to home value due to cap on mortgage interest deduction. I only heard about changing the cap gains exemption on sale of principal residence on here so I'll need to take a look at that. Probably wouldn't affect us too much.
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Old 11-02-2017, 07:35 PM   #73
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I just did a quick check of how the new tax proposal would affect us. Seems to be lots of moving pieces but no real change in the bottom line. We benefit slightly from the lower rates but that's almost exactly offset by elimination of personal exemptions and certain deductions. We have no income tax in Texas but we'd lose the sales tax deduction. And the $10K cap on property tax would negate our current strategy of bunching property tax every other year, as the higher standard deduction would be slightly better.

I like the 12% rate going to $90K for MFJ. For us that will mean larger Roth conversions and a lower rate on those conversions compared to our current plan. That's probably the biggest positive I see.

This seems to be a much bigger deal on the corporate side. Huge rate drop and other benefits, like 5 years of expensing capital expenditures. My former Megacorp has stated publicly (in a recent earnings call) that any benefit from tax reform will go directly to shareholders in the form of higher dividends and stock buy-backs. I suspect that may be the case for many large corporations. If so, there could be additional direct benefit to folks like us, who hold lots of stock, beyond the usual talking points of economic growth and jobs.
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Old 11-02-2017, 08:03 PM   #74
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Another thing to note is that only a few of the features in this tax bill are permanent, most notably the decrease in the corporate tax rate from 35% to 20%. The rest expire after 6 years or so.
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Old 11-02-2017, 08:10 PM   #75
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Can I remind everyone that this is not law yet. Michael outlined the steps it needs to go through... Running through your tax calculations seems premature to me. Who knows what the final version will be. I'd rather do other things than calculate "what if" taxes on something that is several steps away from law.

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A reminder - this is just a bill. It still needs to

- be passed by majority vote in the House
- another tax bill needs to be written, then passed in the Senate
- the two bills need to be reconciled
- both chambers need to pass the new reconciled bill
- then it needs to be signed by POTUS.

Lots of things will change during that process - if it makes it that far.
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Old 11-02-2017, 08:13 PM   #76
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I figure a big hit to home value due to cap on mortgage interest deduction. I only heard about changing the cap gains exemption on sale of principal residence on here so I'll need to take a look at that. Probably wouldn't affect us too much.
This is the language I found on the capital gains exemption on sale of principal residence. Looks like they only increased the time you have to have lived in the residence.
Quote:
The proposal would also limit capital-gains-tax breaks on home sales. Currently, homeowners can generally exclude from gross income up to $500,000 profit on a home sale if they’ve used the house as a principal residence for two out of the previous five years. The GOP proposal would change that so the exemption would be applied only if people lived in the home as their primary residence for five out of the prior eight years. And they’d be able to use the exemption only once every five years, targeting speculators and home flippers.
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Old 11-02-2017, 08:16 PM   #77
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The Wall Street Journal is running a "live coverage" bit as they analyze various aspects of the new bill. Looks like no subscription is needed for the overview.
https://www.wsj.com/livecoverage/tax-bill-2017
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Old 11-02-2017, 08:16 PM   #78
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I think the loss of the medical expenses deduction is really going to hit some folks with high medical and/or long term care expenses hard.

The GOP tax bill would wipe out key deduction for nursing home residents
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Old 11-02-2017, 08:22 PM   #79
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here is another little gem I found in here
SEC. 1309. REPEAL OF DEDUCTION FOR ALIMONY PAYMENTS.
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Old 11-02-2017, 08:25 PM   #80
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This is the language I found on the capital gains exemption on sale of principal residence. Looks like they only increased the time you have to have lived in the residence.
And the capital gains exclusion phases out for every dollar your average AGI over the 3 years from when you sell it exceeds $250K (double for MFJ).
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