Taxes time 2018 - what to expect ?

[pb4uski]

Social Security was tax-free for decades before the first law was passed in the 1980s to TAX SS.

That is what lawmakers do... they continue to pass new laws that affect us positively or negatively.

Today, some lawmakers are considering changing the current RMD laws. Hopefully, RMD rules will be changed for seniors' benefit.

The current taxing of SS is not written in stone either... and hopefully that law also might change in the future for seniors' benefit.

For some bizarre reason you don't like the idea that lawmakers may change laws to help seniors.


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On the last part, no... I don't mind the proposed change to RMDs to something that is less restrictive than the deal that I signed up for .... I challenge you to find where I said that I didn't like them. My problem is with people like you that now that the chickens are coming home to roost and they have to pay tax on income that was deferred long ago think it is an outrage and... to use your words... draconian... despite that fact that you knew about RMDs long ago and should have planned for them.

On the first part, it was a legislative mistake that SS was initially not taxed. SS has many similarities to contributory pensions and the 1980s change to tax them just changed it to be more similar with the taxation of contributory pensions and annuities where you are taxed on the portion of payments that are no contributions.

 

[Helena]

It does sound like you’re trying to pick a fight.

pb4uski does come across that way.

He appears to be super passionate that the government gets every taxed penny. Maybe he's an IRS agent traveling incognito.

.

 

[gerntz]

High SALT states tend to fund more of their programs with state tax. As a result of those programs, they rely less on federal government to fund programs. States without high SALT then take federal dollars (paid by people in all states, including high SALT) to cover similar (but often less robust) programs. There are lots of articles on this. This is the first article that came up in discussion.
https://www.apnews.com/2f83c72de1bd440d92cdbc0d3b6bc08c

Well if you have higher SALT, yes, you would fund more things in your state with it. SALT is a choice.

If a state receives less Fed $ because its SALT are higher, I'd like to see that cause & effect. But showing that a state with high SALT gets a lower % of the Fed tax it pays back doesn't show that c & e necessarily. The reason could as easily be that the lower SALT state is poorer than the high one. And the Feds do distribute more to poorer folks, in general.

 

[gerntz]

On the first part, it was a legislative mistake that SS was initially not taxed.

The Congress passes the laws as it wants them to be at the time. That they're later changed doesn't mean the initial version that existed for 10's of years was a mistake.

 

[gerntz]

I am one of many seniors who hate being F0RCED by draconian RMD laws to take out more tax-deferred money every year than I need or want which not only raises my RMD taxes, but also causes my Social Security to be taxed. Thank God there are at least some lawmakers who are now taking a second look at that abomination.

So you're telling us that when you put tax-FREE money in your IRA that you didn't know you would a) be forced to take a % starting at 70.5 and b) that you would be taxed on that income? If not, why not? If so, why did you fund the IRA? I don't understand why you think IRA should be yours tax-free.

 

[GrayHare]

On the last part, no... I don't mind the proposed change to RMDs to something that is less restrictive than the deal that I signed up for .... I challenge you to find where I said that I didn't like them. My problem is with people like you that now that the chickens are coming home to roost and they have to pay tax on income that was deferred long ago think it is an outrage and... to use your words... draconian... despite that fact that you knew about RMDs long ago and should have planned for them.

I have to agree. Anyone that did not want an upfront tax deduction with tax deferral should not have used an IRA.

 

[Amethyst]

The calculators online say it will be a wash.

The 10K limit on taxes hurts us. We pay almost $10K in property taxes alone, and much more in state/local tax. So we'll just take the standard deduction, like everybody else.

OTOH, no more AMT, hurray! Was so sick of it.

 

[Chuckanut]

I don't have a problem with RMDs.

I do think it is unfair that the amount one can earn before SS starts being taxed is not indexed to inflation. That is a small tax increase every year on many SS recipients.

 

[Amethyst]

RMDs are a non-issue for us currently, as Mr. A.'s retirement accounts were small, and the big age difference helps too.

Now my future RMDs OTOH...I know where you are coming from.

Today, some lawmakers are considering changing the current RMD laws. Hopefully, RMD rules will be changed for seniors' benefit.


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[pb4uski]

.... He appears to be super passionate that the government gets every taxed penny. ...

You obviously didn't read my response and have not read many of my posts.

Other than p.j.mask, it doesn't seem like you are getting much sympathy.

 

[Chuckanut]

Maybe he's an IRS agent traveling incognito.

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More likely he is among the dangerous radicals that infest this site. I think I will add him to my list of suspects. Oh wait... He's been on it for quite a while!

 

[pb4uski]

I don't have a problem with RMDs.

I do think it is unfair that the amount one can earn before SS starts being taxes is not indexed to inflation. That is a small tax increase every year on SS recipients.

+1 virtually any dollar amount hurdle included in the code that is not indexed for inflation has that impact.... like the $10k limit on SALT taxes.... sort of like pouring salt in the wound I guess.

 

[Chuckanut]

Keep in mind that when Congress fixes SS, they usually take away benefits. Years ago when Congress fixed SS, the full retirement age went up. A few years back they did away with the loophole that allows some of us to collect SS on our spouse's account while we let our own SS benefits increase until we are 70.

Like my old grand pappy used to say, "Be careful what you ask for, somebody might give it to you".

 

[pb4uski]

True, but to be fair the file and suspend was arguably not a conscious benefit that they designed into the law but a loophole that people started taking advantage of... so my "closed a loophole" would be another's "took a benefit away".

Ditto with them taking away the Roth conversion horse-race loophole.

 

[TwoByFour]

I have to agree. Anyone that did not want an upfront tax deduction with tax deferral should not have used an IRA.

It does seem odd to me also. For me the main benefit of the 401k which became my IRA, was the employer-match I received, which was quite generous. But RMD's are taxed as ordinary income, while the taxable part of my portfolio is equities, taxed as QD and LTCG, which for me is a better deal and more flexible as to what I can do with it.

As to 2018 taxes - I have no idea what will happen. We had lots of changes this year so I didn't try to compare it to 2017. I will just wait until I get all my 1099 and run it through Turbo. I made estimated payments based on 2017 tables, so that will be interesting.

 

[pb4uski]

On the last part, you could open a What-If worksheet in TT, check the 2018 checkbox and then change the amount in the column to your estimate for 2018 to get a good idea.... and then compare the result to what you will have paid.

 

[Helena]

Other than p.j.mask, it doesn't seem like you are getting much sympathy.

I've experienced rude hostility from various posters here since I first began posting on this forum. I don't lose any sleep over it.

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[target2019]

Add to Ignore List.
Problem solved!

 

[Choices]

Limitation on SALT deduction means we will pay a bit more than we would have...next year, RMD so will pay tax on that. Glad I have an IRA, some folks don’t have much other than SS and a savings account.
The Tax on the IRA is a first world problem, IMHO and I do not bitch about that.

 

[beowulf]

does calculators confirm this assertion?

Yup. I’ve run them with several different scenarios and they all come out roughly the same.

 

[beowulf]

Was there an aspect of "tax-deferred" retirement savings that you forgot about? Was it ever represented that it would be tax-free? Were you unaware of RMDs until recently? What was your marginal tax rate when you saved he money that is now subject to RMDs? What is your marginal tax rate now?

Sounds like a first-world problem to me.

The RMDs are not the problem, nor are withdrawals from tax deferred accounts. In fact, taxable income is about the same as last year as I used the RMDs in lieu of making my usual 4% withdrawal from non Roth IRAs. Nothing forgotten. The simple fact is that the lower tax rates don’t make up for the deductions I lost that now force me to use the standard deduction.

I have no idea what my marginal tax rate was when I put money into IRAs and 401Ks. That was over a period of 30 years. If you are saying that I benefitted by paying lower taxes in prior years, of course I did. Everyone who contributed pre tax money is in the same situation. What I wasn’t aware of in the past that there would be such a large change in the tax code this year. Were you?

 

[beowulf]

Have yet to figure out/understand how one's SALT should affect one's Fed tax obligations. SALT is a choice.

Not sure what you are saying. Yes, it’s a choice. But we chose to not live in a shack in a poverty stricken area so we can lower our taxes. Nor are we going to leave our friends and family because the tax code changed for 2018 with no prior notice to plan for. Would you move to a state with no income tax, extremely low property taxes or other areas that were eliminated or reduced?

We have lived in the same house for 40 years and have no intention of moving to save a few dollars. It’s not thevstatus quo I am upset with, it’s tax code changes that hurt the middle class and help the wealthy and corporations I am unhappy with.

 

[bingybear]

I've experienced rude hostility from various posters here since I first began posting on this forum. I don't lose any sleep over it.
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I think I've seen 2 threads where feathers got ruffled. p.j noted in this thread (I think) that you were not liking that you could not write off SALT taxes on the fed returns. I think others, including myself thought you were not happy with having to pay taxes on RMDs and/or having to take a defined RMD amount/percentage. Obviously I could be wrong.

I actually like the idea of not having to take a defined RMD and not having to pay taxes on the RMD. I think most on the forum would like it. I just think most don't believe it will happen in the the near future if at all in their lifetimes.

I think there are many on this board that try to figure the best way to navigate RE finances given what is likely in the near/mid term. I also think most don't think 0% taxes on everything is likely in the near term.

I do think the government will alter the RMD tables a bit due to longevity changes. IIRC a review of these tables was in the news previously. I'm not expecting much.

Complaining that you have to pay taxes on RMDs on this board will likely help little as none of us control that. Working with others to figure out how to minimize taxes is what is often done on these boards. People here may be able to help on that. I doubt someone on this board can make taxes vanish.

 

[Fedup]

I wouldn’t say the new tax code hurts the middle class. My kids have been paying a lot higher tax rate than I am for years. It’s about time they get a break. They have zero deductions period. One kid I consider middle class, single and self employed, so she pays through the nose. They are not hurt by this new tax code. In fact, they start to have some money to save.

 

[HFWR]

More likely he is among the dangerous radicals that infest this site. I think I will add him to my list of suspects. Oh wait... He's been on it for quite a while!

Part of the er.org deep state...