Federal Tax Cuts Delivered for us - your experience?

[CRLLS]

pb4uski, I can't speak to Vt taxes. You are right ish. Ill tax rate is 4.95% that is based on federal AGI.

Each State gets to decide what deductions are allowed and their own tax rates. Flat tax vs progressive tax rates make comparison dependent on income. To compare one state vs an other requires an assumption of income. Change that assumption and the results of that comparison change. Change your income assumption from 100K to 200K and I believe that Vt taxes will be higher than Illinois

My original point was not Illinois doesn't have high taxes. We do. Just not as high as some might think when it comes to "income" tax, and it currently favors retirees.

rk911, I won't comment on whether Illinois will tax pensions in the future. I am not a prognosticator. I can only deal with what is before me today. Today, pensions are exempt, as are many other retirement incomes. I wonder if your lower effective tax rate situation is primarily due to the Federal deduction being ~2x what it was in 2017. I do know that my 2018 taxes to Illinois is Zero, nil, nada, zilch. This is my first year with no earned income and I had some Roth conversions. And that, I do like.

 

[HarveyS]

I'm in IL. For 2018 my personal fed tax as a percent of total income will be -0.9%. Whoopie! Oops, Fed tax as a percent of AGI will increase 0.4% for me in 2018. The elimination of deductions has caused my AGI to increase and more than offset the bracket changes.

 

[ncbill]

It sure simplifies things...no AMT worries now for most filers & no need to futz with itemized deductions for most as well.

 

[samclem]

A note: The discussion of individual or collective impact of the 2018 tax law may yield some interesting insights.
The discussion of this or that federal spending priority is not directly related to this topic.

 

[rk911]

...I wonder if your lower effective tax rate situation is primarily due to the Federal deduction being ~2x what it was in 2017. I do know that my 2018 taxes to Illinois is Zero, nil, nada, zilch. This is my first year with no earned income and I had some Roth conversions. And that, I do like.

yup, I think that's exactly the case. that and the lowering of tax rates. our TI in 2018 is <1% than for 2017. our deductions in 2018 were basically the same as 2017. I realize that every situation is different...no such thing as a one-size-fits-all tax other than maybe a flat tax with no deductions. but that's for another thread.

 

[MarieIG]

Haven't done my income tax yet. Have to deal with my property general tax (as opposed to my property school taxes) first.

 

[gerntz]

just finished preparing our 2018 taxes. all income and deductions are entered into Turbo Tax. results are a 3% decline in our effective tax rate between 2018 (15.5%) and 2017 (18.5%). not going to file right away...leaving some time for any "gotchas" to rear their ugly heads.

But that's a 16% reduction in taxes overall - if your AGI is similar.

 

[gerntz]

Just out of curiosity - does the OP live in one of the "favored" states with a low or non-existent state tax. Those of us living where a high state income tax may not have quite as pleasant news coming.

STATES aren't "favored". PEOPLE make the choice where to live & what SALT and mortgage interest to pay. Why SALT should affect Fed income taxes paid escapes me.

 

[LOL!]

STATES aren't "favored". PEOPLE make the choice where to live & what SALT and mortgage interest to pay. Why SALT should affect Fed income taxes paid escapes me.

I live in a no-income tax state. My SALT are under $10,000. But before 2018 I was able to bunch deductions into every other year in order to save on my taxes. No more. My taxes went up. I was paying an effective rate of about 2% and now I will pay close to 4%.

 

[donheff]

So far my taxable income looks very close for 2017 and 2018 but 2018 tax looks a bit higher. I will see for sure when DW gets her 2018 K1.

 

[donheff]

I have read a few articles saying that the IRS tax withholding tables are under-withholding for a lot of people in 2018. Or rather, they may be more accurate in some respects but since about 70% of filers expect refunds based on the past, many filers may get no refund or even owe a little. If correct, this April surprise could cause an uproar. It doesn't affect us as much because we all spent the last year computing impacts in multiple tax estimators.

 

[pb4uski]

I have read a few articles saying that the IRS tax withholding tables are under-withholding for a lot of people in 2018. Or rather, they may be more accurate in some respects but since about 70% of filers expect refunds based on the past, many filers may get no refund or even owe a little. If correct, this April surprise could cause an uproar. ....

The silver lining if that occurs as you think it might is that it might prompt a teaching moment to get withholdings close so taxpayers are no longer making an interest free loan to the federal government and that one can just dedicate a portion of each paycheck to saving rather than living paycheck-to-paycheck and using tax withholding as phantom savings.

Also, it will make the harmful impact of tax identity theft less if the taxpayer owes rather than having identity theft hold up a big refund.

 

[target2019]

Dec 2017: Yeaaaaaaa! We're in a lower tax bracket. Congressman Ron voted for tax reform.

Apr 2019: Whaaaaat? The tax is almost the same.

The concern in tax prep business where I will toil again this year, is, "How do we explain the new tax situation?"

Fortunately, I just prepare, and do no splainin'

 

[Rustic23]

2017 effective Tax rate 14.14%. this year 11.57%. Adjusted gross income went up about $1,500. Paid about $3,000 less in tax. No state tax. High property tax, but still could not beat the standard deduction (SD). Took SD both years.

 

[rk911]

But that's a 16% reduction in taxes overall - if your AGI is similar.

2018 taxable income vs 2017 TI was down ~5.5%. total federal tax dollars paid was down ~25% (pretty sure my math is right but I am getting old...can't hardly remember breakfast!)

getting a large refund from the feds...even getting a small refund from Illinois. we file quarterly estimates and I try to adjust each year to be +/- $100 owed/refunded. it's a pretty hard moving target given the nature of our investments. but I would rather pay to the feds and state than give either an interest free loan.

 

[dtbach]

A note: The discussion of individual or collective impact of the 2018 tax law may yield some interesting insights.
The discussion of this or that federal spending priority is not directly related to this topic.

It was slightly better for me. Not worth the impact to the Federal Deficit.

 

[Cut-Throat]

It was slightly better for me. Not worth the impact to the Federal Deficit.

+1

 

[SumDay]

Hearing lots of grumbling from friends, some of whom have no clue how it impacted their actual tax, but are outraged at the smaller refund. https://www.nbcnews.com/business/ta...ppened-my-refund-n969366?cid=eml_nbn_20190208

 

[target2019]

The larger refund from previous years was found money, so they thought.

 

[jazz4cash]

I guess next week we’ll get all the stories about state taxes being higher due to higher taxable income with no reduced brackets to offset. We paid more Fed tax but the increase at the state level might be worse.

 

[audreyh1]

Hearing lots of grumbling from friends, some of whom have no clue how it impacted their actual tax, but are outraged at the smaller refund. https://www.nbcnews.com/business/ta...ppened-my-refund-n969366?cid=eml_nbn_20190208

Yeah, what can you say. I guess these are the folks who would be absolutely hopeless without payroll deductions and forced contributions to SS and Medicare.

I just can’t imagine counting on a certain refund and having no clue with respect to withholding and taxes owed.

 

[pb4uski]

The larger refund from previous years was found money, so they thought.

Yup.

and we let them vote.

 

[target2019]

Yup.

and we let them vote.

I believe the constitution let's them vote.

 

[ERD50]

I believe the constitution let's them vote.

Not if I were King!

-ERD50

 

[target2019]

So, I have most data now, just waiting for the brokerage statement.
I went into TT 2-year comparison, and modified a few entries to eliminate the differences (like an RMD this year). Our calculated federal tax was just about the same, 2017 vs. 2018.
Our bracket was reduced, 25% to 22%. Still requires more thought, but I don't mind the situation.