HFWR
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
My effective rate dropped by 2%.
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
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.
If I could just persuade all the other taxpayers to do the same thing, I would.I'm sure the government will take it as a donation to lower the deficit
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).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.
Agh, 4 tax returns? I think that would drive me to drink! You are a wonderful person to help out your mother, your daughter, and your son, with their taxes as well as doing your own taxes.I've filed three returns now. My mum's taxes and rate increased, mostly due to the loss of the personal exemption. DD's taxes were about the same, as were mine. Still have one to go, our son, but no rush, he lives abroad.
I missed the cutoff level for the lowest Medicare Part B premiums by about $300 (so near, and yet so far!). Despite beating the problem to death I could not for the life of me find it anywhere, with no Schedule A for me this time. So, I was not happy about that. It's not like I'm a billionaire or something, grrrr. Just call me Melinda Gates.The good news for us is I finally was able to use a substantial foreign tax credit that had been accruing for years.
Our MAGI is just under a cutoff level for IRMAA. Much closer than I projected, something I really need to focus on this year.
I've filed three returns now. My mum's taxes and rate increased, mostly due to the loss of the personal exemption. DD's taxes were about the same, as were mine. Still have one to go, our son, but no rush, he lives abroad.
Thanks. I admit DD doesn't need the help but it's an opportunity to visit.Agh, 4 tax returns? I think that would drive me to drink! You are a wonderful person to help out your mother, your daughter, and your son, with their taxes as well as doing your own taxes.
Ouch. That sucks, Melinda. Good thing it's only a year. Last year I went over due to a dumb mistake, and almost went over again this year. What saved me was the HSA contribution.I missed the cutoff level for the lowest Medicare Part B premiums by about $300 (so near, and yet so far!). Despite beating the problem to death I could not for the life of me find it anywhere, with no Schedule A for me this time. So, I was not happy about that. It's not like I'm a billionaire or something, grrrr. Just call me Melinda Gates.
Should I take the standard deduction or itemize? - The federal tax reform of 2017 significantly raised the federal standard deduction. Under current Maryland law, if you take the standard deduction the federal level, you cannot itemize at the Maryland level. You may take the federal standard deduction, while this may reduce your federal tax liability, it may result in an increase to your Maryland income tax liability. The Comptroller’s Office encourages you to run your income tax returns under both deduction methods, and to compare the results of taking the standard deduction versus itemizing yours deductions, to see which method causes the lowest overall tax liability.
Maryland has not been harmonized with Federal on the standard deduction for a while. They did bump the standard a bit in 2018.I can't really compare 2017 to 2018 taxes, for me they are too different with a half-year of W-2 income in 2017 versus a little consulting and a big realized capital gain in 2018.
But Maryland didn't do its its taxpayers any favors. Apparently the state made no adjustments to harmonize with Federal, even though they start with Federal AGI and use Federal deductions. It appears that my 2018 Maryland income tax is ~10% higher than my Federal income tax
It seems the state only lets you itemize if you itemize on Fed. My itemized deductions are a little short of $24K (so my lowest Fed tax is with the standard deduction) and hence MD wants me to use the state standard deduction of $4,500.
It turns out I can choose to itemize on Federal, which only cost me $150, to save ~$1100 on my state income tax.
MD knows this is an issue and did nothing about it. From the Comptroller's website.
Maryland has not been harmonized with Federal on the standard deduction for a while. They did bump the standard a bit in 2018.
At my taxaide sites we have always watched to see if it made sense to force itemization on the FED to take advantage of MD itemization. Sometimes it results in a lower total tax liability. This has been the case even before 2018.
In short, this is not a new issue. It has been around for a while.
I can't really compare 2017 to 2018 taxes, for me they are too different with a half-year of W-2 income in 2017 versus a little consulting and a big realized capital gain in 2018.
But Maryland didn't do its its taxpayers any favors. Apparently the state made no adjustments to harmonize with Federal, even though they start with Federal AGI and use Federal deductions. It appears that my 2018 Maryland income tax is ~10% higher than my Federal income tax
It seems the state only lets you itemize if you itemize on Fed. My itemized deductions are a little short of $24K (so my lowest Fed tax is with the standard deduction) and hence MD wants me to use the state standard deduction of $4,500.
It turns out I can choose to itemize on Federal, which only cost me $150, to save ~$1100 on my state income tax.
MD knows this is an issue and did nothing about it. From the Comptroller's website.
This is exactly the issue I was expecting but it did not result in a huge increase. I usually use MD ifile for state taxes but this year I tried HR Block and it made a huge difference because you don’t need to add back property tax in the SALT limit, only income taxes so my MD AGI did not go up as much as my Federal.