Moves due to tax bill passage

[joeea]

Interested in year end moves due to passage.

There's nothing for us to do. No moves we could do would change anything.

 

[SecondCor521]

I'm going to help my Dad make a distribution from a marital bypass / credit shelter trust to himself because the tax rates for trust income is higher than for single taxpayers.

Quick questions if anyone can confirm for me:

In the trust, my Dad owns shares of VWIUX that have thrown off some "non-taxable income". From reading, my guess is that this income is not truly non-taxable income, but is only federally exempt from taxation.

First, is that the case? I understand the income would be taxable at the state level.

Second, assuming the answer to the first question is yes, then obviously I should ignore that income for the purposes of calculating the distribution from the trust to my Dad, right? I'm pretty sure that's right, but I'm losing confidence in myself since this didn't occur to me until today - if I hadn't thought of this today, I would have over-distributed by the amount of this "non-taxable income", which is a several thousand dollar error.

 

[Just_Steve]

Any New Yorkers that haven't seen that the governor signed into law that you can prepay your 2018 school and property taxes in 2017.

https://nypost.com/2017/12/22/cuomo-signs-order-to-help-new-york-property-owners-with-new-tax-bill/
Gov. Cuomo issued an emergency order Friday allowing property owners to prepay their 2018 school and property taxes so the levies can be deducted from this year’s federal returns.

 

[Nightcap]

Paid my 2018 pledge. Paid my spring 2018 property taxes. Paid my January mortgage payment.

 

[cusetownusa]

Any New Yorkers that haven't seen that the governor signed into law that you can prepay your 2018 school and property taxes in 2017.

https://nypost.com/2017/12/22/cuomo-signs-order-to-help-new-york-property-owners-with-new-tax-bill/
Gov. Cuomo issued an emergency order Friday allowing property owners to prepay their 2018 school and property taxes so the levies can be deducted from this year’s federal returns.

My School tax bill doesn't come until around September...does this mean they are going to issue them now?

 

[Just_Steve]

My School tax bill doesn't come until around September...does this mean they are going to issue them now?

I have heard some districts are but don't think mine is among them but the town is accepting the property portion.

 

[ERD50]

My School tax bill doesn't come until around September...does this mean they are going to issue them now?

It varies by locality, but our county is allowing you to prepay for 2018 up to the amount of total property taxes charged in 2017. You'll need to check with your taxing body (and many of the local news sites have had the info wrong, or at least it disagreed with our official, and updated county treasurer's web site).

-ERD50

 

[FIREd]

I ran TurboTax last night and found out that I had not sent enough in estimated tax payments to cover my California income tax liability for 2017 (before moving out of state). So I quickly sent a payment to the FTB online to get an extra deduction on my FIT return.

 

[Clone]

We contribute to a college foundation which gives us the ability to pay for season tickets. Under current law, 80% of that number is deductible. Under the new plan, as near as we can tell, these contributions are not deductible.

We will prepay our 2018 contribution, and perhaps our 2019 contribution.

We are also prepaying the 2nd half of our property taxes, and prepaying our church pledges.

The future looks like an oscillating standard deduction/schedule A deduction every other year scenario.

 

[FIRE'd@51]

We contribute to a college foundation which gives us the ability to pay for season tickets. Under current law, 80% of that number is deductible. Under the new plan, as near as we can tell, these contributions are not deductible.

I'd probably watch the games on TV and donate that amount to the academic side of the college.

 

[OldShooter]

... Under the new plan, as near as we can tell, these contributions are not deductible. ...

OK, I'll ask. Why should other taxpayers, like me, subsidize your tickets?

It is really the same problem as for state and local taxes. The beneficiaries of the tax expenditure should be the ones paying the taxes. IOW, the residents. To export part of the cost to the rest of the country is clearly unfair.

 

[SecondCor521]

Before Porky shows up, I'll just add to the thread that I today updated my spreadsheet estimating my AGI because a Vanguard dividend (for VFIAX) was larger than I expected. It is a good thing I hadn't done my Roth conversion based on the estimate; I would have been on the wrong side of my particular cliff.

ETA: To MichaelB's point two posts below, the thing to do is doublecheck your actual dividends and capital gains received instead of relying on estimates, especially for fine-tuning stuff.

 

[gayl]

Got email from FTB (CA Tax) reminding me that I have to initiate payment by Friday for it to be deductible on 2017 return .... county already sent me one

 

[MichaelB]

Let’s please keep this thread on topic, which is things we can do before year end to maximize our advantage wrt the new tax law. This is not the thread for sermonizing or editorializing .

 

[Clone]

OK, I'll ask. Why should other taxpayers, like me, subsidize your tickets?

It is really the same problem as for state and local taxes. The beneficiaries of the tax expenditure should be the ones paying the taxes. IOW, the residents. To export part of the cost to the rest of the country is clearly unfair.

I agree with this. I don't understand how this ever was deductible.

Like most of us here, we did not make the rules.

I will, however, decide how I choose to play the game based upon the rules that are written.

The contributions to the foundation that endow scholarships will continue to be deductible. No need to pull those forward this year. We fund those through another mechanism that bypasses the tax forms. (Gifts of Grain) I really think the new tax laws will open some doors for Roth conversions that I did not see previously.

 

[2B]

Let’s please keep this thread on topic, which is things we can do before year end to maximize our advantage wrt the new tax law. This is not the thread for sermonizing or editorializing .

In my experience, my infrequent posts tend to bring forth Porky.

I live in a high property tax state but have no state income tax. I've been bunching my deductions to itemize every other year. Fortunately, 2017 is a "bunching" year. Next year is a standard deduction year so I gain a few hundred dollars.

I set up a donor directed fund a few years ago for charitable contributions. Fortunately, there is a decent balance in it so I hope to stretch it until I need to take RMDs. If I can't, I'll have to see if I can do direct transfers to this charitable fund from my IRA before RMDs begin.

Overall, the change in personal tax rates, etc. make very little difference to me and probably not much to most Americans. The key is whether lower corporate rates can improve economic growth faster than our political class can spend it -- not likely. For the record, I'm a solid libertarian.

 

[FIRE'd@51]

I set up a donor directed fund a few years ago for charitable contributions. Fortunately, there is a decent balance in it so I hope to stretch it until I need to take RMDs. If I can't, I'll have to see if I can do direct transfers to this charitable fund from my IRA before RMDs begin.

You can't do a direct transfer from an IRA to a DAF. Of course you can still take a normal distribution from your TIRA and contribute the cash to your DAF. If it's large enough to get you over the new standard deduction threshold, you can take it as an itemized deduction on Schedule A.

 

[pb4uski]

I'm thinking about prepaying my 2018 property taxes for both properties.... ~$10k I talked with the assistant town clerk today and she said I could do it and many people have called asking about it and she has already received 3 checks.

If I do this I can do another Roth conversion of the same amount so our taxable income will be unchanged... but the effective rate on that additional Roth conversion will be $0 (also $0 for state I think)... bringing my effective rate on all my 2017 Roth conversions to about 6.4%.

I can't think of any downsides to doing this...... thoughts?

Im struggling to see any downside. I guess Mom should do the same now that I think of it.

 

[SecondCor521]

I can't think of any downsides to doing this...... thoughts?

Cash flow is the main one I can think of.

Then there's whether or not there are other uses of that AGI bucket, like capital gains harvesting.

You'll have a $10K higher AGI, so any AGI-dependent goodies in your life (ACA subsidies, Pease limitation, etc.) would be affected.

I'm sure you've thought of these.

 

[Sunset]

Well, since I itemized and showed about $16000 in itemized expense in 2017 it seemed like a no brainer to pre-pay the roughly $5500 in property taxes we'll be assessed in 2018. Except. Callled Polk county Oregon and Riverside county California tax offices and neither is accepting payments that have not yet been assessed. We normally pay in full as soon as the property tax statements come out - how do others manage to bunch those payments? The Oregon office said they were precluded by Oregon law from accepting payments not assessed.

Cook County IL, will upon request send a bill for 55% of the next years estimated property taxes.

 

[pb4uski]

Yes, cash flow is not an issue, nor are Obamacare subsidies. And I'm prioritizing Roth conversions over LTCG at this point. But all good thoughts.

 

[ERD50]

I'm thinking about prepaying my 2018 property taxes for both properties.... ~$10k I talked with the assistant town clerk today and she said I could do it and many people have called asking about it and she has already received 3 checks.

If I do this I can do another Roth conversion of the same amount so our taxable income will be unchanged... but the effective rate on that additional Roth conversion will be $0 (also $0 for state I think)... bringing my effective rate on all my 2017 Roth conversions to about 6.4%.

I can't think of any downsides to doing this...... thoughts?

Im struggling to see any downside. I guess Mom should do the same now that I think of it.

Yes, check this other thread:

http://www.early-retirement.org/forums/f28/release-of-final-tax-bill-details-89791.html#post1986498

The IRS announced TODAY (after I already made my prepayment earlier today), that unless you received a bill this year, for taxes due next year, they won't be an allowed deduction.

I think there will be huge backlash, and this will get overturned, but who knows? That could render your added Roth conversions to be taxed at a higher rate (and IIRC, re-characterizations are maybe not allowed in 2018, even for a 2017 conversion?).

I hate tax complexity.

-ERD50

 

[pb4uski]

Yes, I just saw that a few minutes ago. It sort of makes sense... if not for this guidance one could have paid many years in advance and take a deduction... which didn't make sense. It's just I was seeing a lot on this and didn't want to miss the boat... but I guess the boat was a mirage.

 

[audreyh1]

It’s sure coming down the wire! Two business days left in the year.

 

[Throwdownmyaceinthehole]

So, one more thing. If I fully fund my HSA this year $7750 (we only have one account, both over 55) which I can do up until April 15, I will get an income deduction and will benefit by paying 15% less tax, right? If I fund it with IRA money taken out after Jan 1 which I will pay 12% on, I will capture a gain of 3%, right? If I take it out of Roth, I will pay no tax and will get the 15% credit and as long as I use it for medical, I will never pay tax on it or the gains, so basically its a Healthcare Rothish. Sorry if this is obvious, but there's so many moving parts, trying to stay under ACA cliff for one more year.