Federal Tax Cuts Delivered for us - your experience?

[HFWR]

My effective rate dropped by 2%.

 

[aja8888]

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

I hope when I am 90 I am still itemizing and paying taxes!

 

[Independent]

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.

 

[jazz4cash]

We E-filed for the 1st time ever. I gave up many years ago after many attempts to find and fix unspecified “info does not match” errors. This time the Bloch software pinpointed the issue so I was able to fix it and return was accepted by IRS. Now what?

 

[Jeb-NY]

Send It In

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.

I'm sure the government will take it as a donation to lower the deficit

 

[Independent]

I'm sure the government will take it as a donation to lower the deficit

If I could just persuade all the other taxpayers to do the same thing, I would.

 

[retiredunder50]

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.

 

[LuckyDog]

Effective tax rate = 4% lower this year...

 

[socca]

Any tax benefit I receive from the new law will be largely wiped out by the additional time needed to figure out how it applies to my situation (and the situation of my Partners and co-beneficiaries). Slap some value on my time (e.g. $50 / hour) and any tax benefit disappears.

On the positive side, the two tax prep software packages I use (H&R Block for a Partnership return; TurboTax for my personal return) seem to be on the ball regarding the new law. I have to sign 14 federal and state tax returns (8 prepared by me; 6 prepared by pros), so this time of year taxes are much on my mind.

 

[ziggy29]

I know I've been scarce for a couple of years; real life and other stuff have been weird. I think things are settled down now. That said, our experience....

Going into the start of early 2019, we thought the tax law changes would save us a bit. Not a heck of a lot since we were only in the 15% bracket before the cuts (and 12% now), but still....

Last year (part of the reason for craziness) my wife, who is a pastor, accepted a call on the north Oregon coast, leaving behind the heat, chiggers, scorpions and rattlers of Texas. We moved here last July.

Our church's treasurer, who is also a CPA, told us she discovered that the new tax law made our reimbursed moving expenses taxable. Ouch! That added $2,000 to our tax burden. Sure, moving forward it should result in lower taxes since that was a one-time hit. But this year? Oof.

 

[Throwdownmyaceinthehole]

We really managed our income this year to stay under the ACA threshold, and take advantage of tax free capital gains. We are in a no tax state. I'm still playing with the amount that I can put into our HSA by April 15th. As DH went on Medicare last December and I will go on this December, our HSA window to fund is closing. I have been funding the HSA from our Roth for the past 3 years, mostly to stay under that pesky ACA threshold. If I put in the full amount of $7613, we will get a credit of $30. If I fund zero, we pay tax of $345, the break even funding point to a zero tax return is around 3.3k. So I'm estimating that $345/7613 is 4.5% tax rate. So is my thinking correct that I should fund it from our IRA and not our Roth? And that would be considered income for 2019? BTW last year we paid $2200 in tax on the same cash outlay, I just managed it differently this year although the change to the SD made a difference. Happy dance, and I also get my first SS check on Weds! I give credit to this website for all the learnedness that has made this possible!

 

[ncbill]

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.

Seems like the above is another argument for paying off the mortgage before retirement...presumably the mortgage interest paid was well in excess of $200?

 

[kite_rider]

The new law will be a tax INCREASE for me! Haven't filed yet but quick calculations show a slightly lower marginal rate which loses out to much higher taxable income due to SALT limitations (9% Oregon income tax plus fairly high property taxes and mortgage interest that used to be fully deductible.). This is the first year I'll actually be using the standard deduction and my taxes still don't fit on a postcard.

Even worse, I think my state income tax will increase even more due to the higher taxable income on the federal form. TBD once I file.

Personally, I can't help but feel like this new law was politically designed to reward some and punish others.

 

[Perryinva]

I paid more overall tax this year than last for the same adjusted income. In other words, though I paid more taxes this year because I had about $11k more income, it was still a higher percent overall than if I had that same increase last year. Lost about $5k in SALT deductions on both fed and state returns, as the actual cause, because while filing with the federal standard deduction gained me $250, with Virginia, you have to file the same federal and state, and filing standard deduction for state, I LOST $1000, so Inhad to file itemized. That, netted against the reduced federal rate meant total extra tax wasn’t a lot, about, $500 in real dollars. Still, it was definitely not an overall tax cut. I had manipulated my withholding to make sure it wasn’t a giant bill. Scheduled to pay about $2400 on 4/15.

Supposedly there is a state special sessionlooking to allow amending the state to file differently than federal as well as eliminating the $10k SALT limit.

 

[MichaelB]

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.

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.

 

[W2R]

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.

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.

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 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.

But next year will be much better. It just has to be. Also I will be getting a refund next time instead of having to pay, because I increased my quarterly estimated taxes quite a bit.

 

[scrabbler1]

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 am also working on tax returns for 3 people, including myself. My (snake-bit) friend, who was "Even-Steven" a few years ago when the total taxes withheld and paid through 1099-R equaled his tax liability, owes money for 2018. However, he saves about $1,150 thanks to the new tax law. His return is the most complicated of the three I prepare. He made several sales of mutual fund shares which will generate two 8949 forms. He also had a tiny amount of Unrecaptured Section 1250 Gains which, unlike last year, are not canceled out fully by capital losses elsewhere. Even though it is a small PITA to deal with, he does pay me for my help. I have to file Schedules 1 (cap gains), 3 (foreign tax credit), and 6 (third party designee) thanks to the new law.

My ladyfriend's tax returns are by far the easiest. I had been filing Form 1040EZ for the previous 5 years. But despite that, her return is a little more complicated this time because of Schedule 6 (third party designee). She saves about $950 thanks to the new tax law.

My own taxes are more complicated because I have Schedule 1 (cap gains), Schedule 2 (ACA subsidy repayment), and Schedule 5 (estimated tax payment). I will owe about 4% more than I would have under the old law because the elimination of the personal exemption hurts me more than the higher standard deduction helps me. Then, with most of my income either investment income or in the 10% ordinary income bracket, I gain nearly nothing thanks to the lower rates. A slightly higher amount of ordinary income pushes some investment income into the 15% bracket. I will have to include 8 pages this time, 2 more than I would have to file if under the old law.

 

[MichaelB]

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.

Thanks. I admit DD doesn't need the help but it's an opportunity to visit.

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.

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.

 

[USGrant1962]

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.

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.

 

[jebmke]

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.

 

[USGrant1962]

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.

Yea, I get that. But before TCJA it was a 12,000-4,500 = $7,500 disconnect. Now it is a $19,500 taxable income bust with the standard deductions, which are now used by ~80% of Federal filers. For MFJ.

 

[jazz4cash]

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.

 

[sanfanciscotreat]

Irmaa

What is IRMAA?

 

[SecondCor521]

What is IRMAA?

LMGTFY

 

[USGrant1962]

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.

Hmm. I used H&RB and got the results I described. I entered property tax and state income tax into H&RB (total was above $10K). Are you saying that the MD form excludes property tax from the SALT limit? If so, HRB did not do that for me.