Federal Tax Cuts Delivered for us - your experience?

[ABQ2015]

I saved about $2K in taxes in 2018 taking the new standard deduction compared to using the 2017 tax table and itemizing plus personal exemption. Mostly because my highest tax bracket went from 28% to 24%.

This is the first year since 1991 (I bought a house that year) that I have not itemized. As a single person with only a $6300 standard deduction, it was always better to itemize, even after I paid off the mortgage. Itemizing saved me a lot of money over the years and was a big motivation for buying a house. My sympathies for those of you who live in high SALT states.

 

[scrabbler1]

For those that want to get a quick, accurate idea of the actual impact on them from the new tax laws, I have found this site to be pretty easy to use and accurate:

https://www.mortgagecalculator.org/calcs/1040-calculator.php

If you enter your info into the 2018 version, it will also carry over to the 2017 version, but you do have to manually turn on the exemptions for 2017.

FWIW, it calculates my 2018 taxes to within a few bucks of my Turbotax output.

It ran the numbers okay. But it didn't figure out the marginal bracket at the end correctly. It used total income without taking into account how much of it is the lower taxed QD and LTCG versus ordinary income.

 

[CardsFan]

It ran the numbers okay. But it didn't figure out the marginal bracket at the end correctly. It used total income without taking into account how much of it is the lower taxed QD and LTCG versus ordinary income.

I don't see any output for marginal brackets. Do you mean EFFECTIVE tax RATE?

If so, you are correct. It uses AGI, which results in a slightly higher Effective Rate. I think Turbotax does the same thing.

EDIT to add: OK, now I see that. Just ignored it before. In my case it was correct: 12% Bracket.

 

[scrabbler1]

In a blue shaded area after the summary but before the tax rate tables, it says this (I Xed out my personal data; emphasis mine):

"Your taxes are estimated at $xxxx. This is xxx% of your total income of $xxxxx. Your total tax payments for the year were $x. Your outstanding tax bill is estimated at $xxxx. This puts you in the 22% tax bracket."

 

[grasshopper]

In 2017 I hit the trifacta my foreign tax credit equalled my income tax, so big goose egg. 2018 had more ordinary income due to interest rates rising, effective tax rate < 1%. Converted the same amount in Roth, had less LTCG.

 

[CardsFan]

In a blue shaded area after the summary but before the tax rate tables, it says this (I Xed out my personal data; emphasis mine):

"Your taxes are estimated at $xxxx. This is xxx% of your total income of $xxxxx. Your total tax payments for the year were $x. Your outstanding tax bill is estimated at $xxxx. This puts you in the 22% tax bracket."

Got it. See my edit.

 

[ProspectiveBum]

Our effective tax rate went from 11.8% in 2017 to 9.2%. The numbers would have been nearly identical if not for the change to the child-tax credit, which grew for us from $550 in 2017 to $4000 in 2018. Without that credit, our effective tax rate would have been 12.1% (basically a wash).

I live in CA, but my SALT deductions are quite a bit lower than some of my neighbors, since we bought our home 20 years ago and Prop 13 caps increases to our property taxes. I know a few folks who won’t fare as well.

 

[scrabbler1]

Got it. See my edit.

Yes, my post and your edit crossed.

But I am nowhere near the 22% bracket for ordinary income. I am barely in the 12% bracket. I am also in the 15% bracket for QD and LTCG. Half of my (taxable) income is taxed at 0%, about 1/4 is taxed at 10.5% (mostly 10% with a sliver at the marginal 12%), and the rest at 15% for QD and LTCG. So, whatever my marginal rates are, they ain't 22%!

 

[CardsFan]

Yes, my post and your edit crossed.

But I am nowhere near the 22% bracket for ordinary income. I am barely in the 12% bracket. I am also in the 15% bracket for QD and LTCG. Half of my (taxable) income is taxed at 0%, about 1/4 is taxed at 10.5% (mostly 10% with a sliver at the marginal 12%), and the rest at 15% for QD and LTCG. So, whatever my marginal rates are, they ain't 22%!

But if I understand, the $$ numbers are more or less correct?

I have seen many calculators that muck up the tax bracket level, so I am not surprised. I think they often just look at the AGI to come up with that number.

 

[scrabbler1]

But if I understand, the $$ numbers are more or less correct?

I have seen many calculators that muck up the tax bracket level, so I am not surprised. I think they often just look at the AGI to come up with that number.

Yes, and I agree. But this calculator asked for the different types of income and correctly calculated my taxes owed using the QD/LTCG worksheet, so it "knew" I had multiple marginal tax brackets.

 

[MJ]

I just finished our Federal tax forms. Amazingly, the total owed/refunded is ZERO! Yes, no refund, no payment.
It's the first time ever and my year included quarterly tax payments, interest, dividends, SS income, IRA pulls, insurance deductions, some consulting income, business expenses, etc.

Do they allow lottery numbers to be all zeros?

I always make sure I "temporarily" owe Uncle Sam money rather than he owing me.
Like many here, I pay estimated quarterly taxes so, I make sure my quarterly totals are no higher than last year unless my taxes/income for the current year are estimated to go lower. Even when I was employed, I made sure that the payroll taxes for both federal/state followed a similar pattern.

 

[jkern]

Even without SALT or mortgage interest limitations, anyone who filed and continues to file Schedule A will have their taxable income increase (no personal exemption). It all depends on whether the additional tax on a higher taxable income is greater than, less than or equal to the tax savings because of lower tax brackets.

 

[lucky penny]

Didn't deliver for me at all & I'm not surprised. Income was a little higher & taxes around $10,000 higher. Taking the standard deduction as a result of losing a big chunk of the SALT deduction was the difference. I saw this coming & had increased my withholding so I'm doing OK. Next year should be better because I'm retiring soon & most of my income will be from a pension that the state & NYC don't tax.

I don't love that my taxes are high but I'm not complaining either. I've been very lucky & wouldn't want to live anywhere else.

 

[Sue J]

The change from the old standard deduction and personal exemption to the standard deduction of $24,000 benefited us by about $320.

Our income in 2018 was just a little higher than 2017 but in 2018 we had access to an HSA and contributed $8900 so our taxable income was quite a bit less.

Still in the 10% tax bracket with a little room to spare!

 

[retiredunder50]

I personally witnessed an ugly effect of the new law. Like many others, I'm a volunteer who prepares taxes at the library. I had a 90 year lady who itemized for the 2017 tax year about $11.5K for property taxes, mortgage interest (yes, she still has a mortgage, actually 2), charitable contributions, and some medical that exceeds the threshold. She has a similar amount of deductions for 2018. She has a small pension and social security income streams. Her income amounts are practically identical for both years. For 2018 she is only qualified for the standard deduction of $13.6K. For the 2017 tax year, she got the personal exemption and her itemized deductions. Her 2018 Federal tax bill is a little more than $200 over her 2017 amount. Again, this is for a 90 year old with little income...

 

[ERD50]

I personally witnessed an ugly effect of the new law. Like many others, I'm a volunteer who prepares taxes at the library. I had a 90 year lady who itemized for the 2017 tax year about $11.5K for property taxes, mortgage interest (yes, she still has a mortgage, actually 2), charitable contributions, and some medical that exceeds the threshold. She has a similar amount of deductions for 2018. She has a small pension and social security income streams. Her income amounts are practically identical for both years. For 2018 she is only qualified for the standard deduction of $13.6K. For the 2017 tax year, she got the personal exemption and her itemized deductions. Her 2018 Federal tax bill is a little more than $200 over her 2017 amount. Again, this is for a 90 year old with little income...

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

 

[Alan]

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

He said her total deductions were $11.5k, not just her property taxes. At least that is how I read the post.

 

[ERD50]

He said her total deductions were $11.5k, not just her property taxes. At least that is how I read the post.

Ahhh, yes, that could be. Even so, w/o some breakdown, it's hard to tell. I can enter those sorts of numbers and come up with $500 lower tax for 2018. Because of the medical carve out for income, and SALT limits, you can't just reverse engineer the numbers.

If that poster saw a $200 reduction, would they have posted it? And said it was "beautiful"? Seems just as likely to occur, it's dependent on the sub-categories.

-ERD50

 

[JDARNELL]

Did he irs waive fees for underpayment this year due to the withholding tables being incorrect?

 

[jazz4cash]

Blue state guy (MD). Single earner, GS-15, $18k SALT each year, $11k mortgage interest, modest dividend and capital gains income.


Taxes were about 7% higher this year than last, but a good bit of that was due to one-time capital gains events in 2018. So overall, the law had little effect, as anticipated.


By MD law, I must use the same deduction method on both Fed and State. I ended up itemizing ($21k) on my federal taxes even though it cost me $600, because itemizing on State reduced MD taxes by $1200. Ideally, I would have used STD for FED, and Itemized for MD.


At least one bill has reached the state house to decouple deduction methods. Looks like MD is going to get a big windfall this year, as loads of former Itemizers use STD.

I just finished my state taxes (MD). The FIT changes made it very confusing to use the free iFile program the state offers. I don't think any changes were made in response to the FIT revisions so the state gets a windfall. It was also not clear how to handle the SALT limitation and I nearly chipped in an extra $1k but I caved in and used the Block software. I itemized for both state and Federal using different deduction methods would be of no help to me. My Federal itemized deductions were just barely over the std deduction.

It sure wasn't any simpler than before.

 

[Jeb-NY]

Lower for Me

It helped that we moved 4 years ago from the state that is part of my alias (high taxes and cost of living) to a state with low taxes and no income tax. I thought I had adjust my withholding to break even or maybe owe a little. Ended up with big refund. I have readjusted to hopefully breakeven or owe a little next year.

The big surprise was since this was the first year I have gotten a refund in many years, 10+, I eFiled for the first time. They promised 3 to 4 weeks for refund, got it in 5 days and that included a weekend.

 

[Just_Steve]

It helped that we moved 4 years ago from the state that is part of my alias (high taxes and cost of living) to a state with low taxes and no income tax. I thought I had adjust my withholding to break even or maybe owe a little. Ended up with big refund. I have readjusted to hopefully breakeven or owe a little next year.

The big surprise was since this was the first year I have gotten a refund in many years, 10+, I eFiled for the first time. They promised 3 to 4 weeks for refund, got it in 5 days and that included a weekend.

Filed on 2/10, refund has been a pending deposit in my checking since 2/14, it says deposit will be completed on 2/21. Totally surprised.

 

[UtahSkier]

Unexpected consequence of tax cut.

Here in Utah, there is a tax calculation that determines amount owed. From that number, there is a deduction based upon federal standard/itemized deductions. Since the federal standard deduction has increased significantly, the deduction amount has increased significantly.

So, my federal tax remains 0 while the state income tax was reduced 25%.

I think this consequence is also true for Arizona and other states as well.

 

[EarlyBirdly]

Well, I *did* have two mugs of coffee instead of one this morning.... But it's just Maxwell House instant.

Careful....That's a "gateway coffee".

 

[W2R]

Careful....That's a "gateway coffee".

OK!!