Federal Tax Cuts Delivered for us - your experience?

[gerntz]

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.

For the first time in years, I expect large refunds as I didn't want to take the time to figure out the impacts of the tax law changes as well as CG's & Div variability, so just widely overpaid. Using 2018 as a base with the new law, I'll plan rather tightly as I have in the past.

 

[Proteus126]

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.

 

[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'll need to look into this. I don't think it will help but I'll give it a shot and see. Do you use the MD ifile program to prepare your state return?

 

[rk911]

For the first time in years, I expect large refunds as I didn't want to take the time to figure out the impacts of the tax law changes as well as CG's & Div variability, so just widely overpaid. Using 2018 as a base with the new law, I'll plan rather tightly as I have in the past.

X2

 

[donheff]

I projected my calculations based on what we expect to see on DW's K-1. I am paying more this year but I have a little more income and some IRA withdrawals not present last year. My net (not marginal) Federal tax rate has dropped about 1.5% of taxable income. I also had a larger than normal deduction last year (two years property tax and high medical) so considering what would be normal ongoing, that 1.5% drop is probably closer to 2.3%

 

[gerntz]

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.

But that would be more more democratic by forcing people to better understand what their governments are doing for or to them.

 

[Proteus126]

I'll need to look into this. I don't think it will help but I'll give it a shot and see. Do you use the MD ifile program to prepare your state return?

No, I just use TurboTax Deluxe + State.

 

[W2R]

I am going to start doing my taxes tonight, with TurboTax Deluxe+State. I think I got all the necessary papers together last night.

I have to admit that it's exciting to not know what to expect, for a change! I'll bet I am the only one here to fully appreciate the FUN aspect of having changes in our tax system. I know the tax changes weren't implemented just for the purpose of creating fun for retirees, but hey, variety is the spice of life as they say so why not enjoy it.

(Here are some exciting rhetorical questions, the answers of which I do not need from you because they will be answered as I do my taxes tonight: )

1. Will my taxes be higher? Lower? who knows.
2. Will the tax forms even look the same? I haven't a clue.
3. Has Louisiana even sent their forms to TurboTax yet, despite being infamously slow about such matters?
4. Will TurboTax be able to update my copy (bought in December) with a bazillion other taxpayers trying to do the same thing on their servers this weekend?
5. Will my AGI be low enough to keep my Part B premiums at $135.50, or will I be penalized by higher premiums this time like I was in 2015?

This time I have RMD's involved for the first time, and also much higher SS in the mix.... the infamous "tax torpedo".

I know I should be worried and upset, but gee, I can't help but find it interesting to have some different factors in the mix. Life is such an adventure - - and even doing taxes is an adventure this year!

 

[Rustic23]

W2R, might just have to have someone check what's in that coffee mug

 

[W2R]

W2R, might just have to have someone check what's in that coffee mug

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

 

[audreyh1]

AMT changes meant we are no longer subject to AMT which is a big tax savings for us.

On the other hand, interest income went up quite a bit due to higher interest rates such that we were just pushed out of the 0% cap gains tax bracket as well as just into the 22% bracket. So ordinary income taxes were up.

Somewhat of a wash.

 

[Scuba]

We haven’t done our taxes yet, but our CPA projected $6K higher taxes due to the SALT limitation. We live in CA so high state income taxes and property taxes. The CA property tax rate isn’t bad, but valuations are high and voters in CA and LA County keep passing measures that increase taxes. Our property taxes have increased more than 40% since we bought our condo in 2003.

 

[W2R]

We haven’t done our taxes yet, but our CPA projected $6K higher taxes due to the SALT limitation. We live in CA so high state income taxes and property taxes. The CA property tax rate isn’t bad, but valuations are high and voters in CA and LA County keep passing measures that increase taxes. Our property taxes have increased more than 40% since we bought our condo in 2003.

Yikes! That's got to be a shock.

My property taxes went up 78% when I bought my Dream Home, because they hadn't reassessed my old home in nearly forever and they assessed my new home at the purchase price. But in my case 78% wasn't that bad since my property taxes were only pushed from $956 to $1701. Our state income taxes and property taxes are not that high (but the state and local services we get for what we pay, are abysmal).

 

[Midpack]

For me it was relatively good news. The law doesn't look good however for the Federal deficit which I'm more concerned about than a couple of % lower personal taxes.

+1.

Our taxes went up because we had more income in our top bracket - Total Wages/Income +10.4%, Taxable Income +9.2%, Total Taxes +16.1%.

 

[gerntz]

The law doesn't look good however for the Federal deficit which I'm more concerned about than a couple of % lower personal taxes.

Don't know where you got this thought.

From Feb. 4, 2019:

"Last week the Congressional Budget Office released a 10-year forecast—the first to assess the effects of tax reform after one year of hard results. Compared with its prereform projection, the CBO now expects annual GDP growth to be almost $750 billion higher by 2027, the last year of its prior forecast. A strong case can be made that tax reform played a predominant role in accelerating GDP growth. While most large economies stagnated last year, a sharp rise in business investment in the U.S. helped drive the economy forward.

On the other side of the ledger, the CBO predicts the tax cuts will add $1.9 trillion of additional debt in the coming decade, and that the government will pay about $60 billion more in interest each year as a result.

So the bottom line says an extra $60 billion a year buys the U.S. $750 billion in annual GDP. That’s a great deal for taxpayers.

Even focusing solely on tax revenue, the government is on pace to collect more than $120 billion each year from that additional $750 billion of GDP—much more than enough to cover the additional interest payments. Even if a significant portion of the projected GDP gains since 2017 are not the result of tax reform, the tax cut still pays for itself.

Tax reform increases real, inflation-adjusted GDP by $300 billion to $450 billion a year in the coming decade, relative to the CBO’s 2017 projection."

https://www.wsj.com/articles/tax-reform-is-covering-its-costs-11549324972

 

[MichaelB]

Once again, this is a thread about individual tax rates and how our taxes changed year-to-year.


Plenty of opportunity to discuss deficits, debts and other stuff in another thread.

 

[RetireAge50]

We saved $320 (married couple using standard deduction). Calculation: ($24,000 -$12,700-$8,100)*10%

 

[jimandthom]

Our taxes look to be essentially unchanged. More benefit from the new tax law will be when I start SS rather than pulling from IRAs. This will help for state tax also, as MI does not tax SS.

We tend to have deductions in the 20K and up range plus the $ for exemptions. The variable in the deductions were generally medical costs and the scholarships to the University in town.

A large amount of our medical can be "timed". These would be glasses, contacts, crown replacement or even just when the appointments are scheduled. The scholarships can be paid anytime.

Basically a non event.

 

[Alan]

We have claimed the standard deduction for quite a few years now as we lived in a no income tax State and had no mortgage or property taxes as we were renters.

I guess we saved a few hundred on the expanded standard deduction but the expanded 22% bracket meant that we could complete my tIRA conversion to Roth so I now have no more IRA to convert. My wife’s tIRA has a balance that we should complete conversions on in 2 years before she starts her SS payments.

 

[braumeister]

I am going to start doing my taxes tonight, with TurboTax Deluxe+State. I think I got all the necessary papers together last night.

I'm jealous. Schwab says it will still be another week for me.

 

[W2R]

I am going to start doing my taxes tonight, with TurboTax Deluxe+State. I think I got all the necessary papers together last night.

I have to admit that it's exciting to not know what to expect, for a change! I'll bet I am the only one here to fully appreciate the FUN aspect of having changes in our tax system. I know the tax changes weren't implemented just for the purpose of creating fun for retirees, but hey, variety is the spice of life as they say so why not enjoy it.
[…]
This time I have RMD's involved for the first time, and also much higher SS in the mix.... the infamous "tax torpedo".

I know I should be worried and upset, but gee, I can't help but find it interesting to have some different factors in the mix. Life is such an adventure - - and even doing taxes is an adventure this year!

I'm jealous. Schwab says it will still be another week for me.

I feel like I've been stood up in a firing line and shot!!! It wasn't due to the tax law changes; what happened is that for various reasons, some of which hopefully will apply to this year only, my AGI was way higher than usual for me, so I got killed.

I could go on.

This is not the most fun way to Blow That Dough. The best I can say is that I can afford it and I'm done with taxes for another year. Still feel jealous?

 

[Chuckanut]

Sometimes we have to pay the “success” tax. It’s a good problem to have.

 

[audreyh1]

I feel like I've been stood up in a firing line and shot!!! It wasn't due to the tax law changes; what happened is that for various reasons, some of which hopefully will apply to this year only, my AGI was way higher than usual for me, so I got killed.

I could go on.

This is not the most fun way to Blow That Dough. The best I can say is that I can afford it and I'm done with taxes for another year. Still feel jealous?

You started RMDs? That’s got to be a big part of it.

And as you stated higher SS.

I don’t think that higher income is going away.......

 

[ownyourfuture]

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

Paragraph 2 sounds similar to something else ....... but I can't remember what it was

 

[W2R]

You started RMDs? That’s got to be a big part of it.

And as you stated higher SS.

I don’t think that higher income is going away.......

You're right; not that part of it, anyway. No more wiggle room.

Sometimes we have to pay the “success” tax. It’s a good problem to have.

Yeah, you're right, really. I feel better about it now that I have had a little dinner. Probably low blood sugar. I don't drink or take illegal drugs to get high, but maybe low blood sugar counts as sort of PUI (posting under the influence).

My taxes were a reasonable, expectable percentage of my AGI so I shouldn't complain. This was a new experience for me and it blew the top of my head off... I just found the emoji below which aptly describes how I felt when I wrote that post.