Primer on House and Senate versions of proposed tax bill.

[frayne]

A pretty good read on the differences of the house and senate tax bills. Where the reconciled bill ends up is probably somewhere in between.
https://www.forbes.com/sites/kellyp...-and-house-tax-reform-proposals/#6c3f01b175a8

 

[gayl]

Does the Senate still need 60 votes to pass?

 

[audreyh1]

What about using chained-CPI for tax bracket increases instead of the current CPI? I didn't see that mentioned in the article.

 

[audreyh1]

Does the Senate still need 60 votes to pass?

No

I think because this somehow has the status of a reconciliation bill, only 51 votes are required to pass as long as it doesn't add more than $1.5 trillion to the national debt.

The budget resolution passed was passed by a 51-49 vote in the Senate and 216-212 in the House in October that raised the debt ceiling and paved the way for this tax bill by allowing fast-track "reconciliation status" for tax cuts.

So this entire process has been a simple majority one.

 

[gayl]

Is that 1.6T over how many yrs?

 

[audreyh1]

Is that 1.6T over how many yrs?

The Joint Committee on Taxation said the bill would increase the federal deficit by $1.487 trillion over the next 10 years.

The Federal Government will collect $1.5 trillion less revenue over the next 10 years.

The CBO says $1.7 trillion.

There are no corresponding spending cuts - well maybe $1B (1000 times less).

If you want to see a breakdown of where the cuts are going, here is one:

Of the $1.5 trillion cost, roughly $1 trillion comes from business tax cuts. Individual tax cuts make up another $300 billion, and the ultimate repeal of the estate tax accounts for the remaining $200 billion.

http://www.crfb.org/blogs/tax-cut-and-jobs-act-will-cost-15-trillion

 

[43210]

Another link from that article
https://www.forbes.com/sites/ashleaebeling/2017/11/10/the-senate-401k-grab/
There are some pretty major changes to retirement plans.

The details are on pages 177-180 of this 253 page PDF
https://www.finance.senate.gov/imo/media/doc/11.9.17 Chairman's Mark.pdf

Instead of separate $18.5k(+$6k=$24.5k if >=50) limits for 401k/403b and 457b, there will be a single limits for 401k/403b/457b.

For 2018 I had planned to put $24.5k into 403b and another $24.5k into 457b (total $49k), but now there would be a total limit of $24.5k instead of $49k, which means I could no longer get income down enough to get about $6k in EITC.

Also they would impose the 10% early withdrawal on 457b plans (currently there's no penalty after separation, regardless of age). This may force me to w*rk til age 55.

I must admit that while these (proposed) changes are detrimental to me, they actually make things more fair and uniform, so I don't really have grounds for complaint (and I can adapt to the new rules). I hope other people can recognize when changes that are detrimental to them personally, are actually moving things more towards fairness and uniformity.

 

[jebmke]

There are no corresponding spending cuts - well maybe $1B (1000 times less).

No but the House Budget which is being reconciled to, takes over $3.5 Trillion out of health care. $500B from Medicare, $1,000B from Medicaid. Another $2T from various other health care programs. That is a ~10% whack on the US health care sector. One hospital in my area has already announced it is closing. Another was on the bubble before this budget. This will accelerate providers dropping out of Medicare or moving to the balanced billing model.

 

[gayl]

For 2018 I had planned to put $24.5k into 403b and another $24.5k into 457b (total $49k), but now there would be a total limit of $24.5k instead of $49k, which means I could no longer get income down enough to get about $6k in EITC.

isn't EITC earned income tax credit for those barely earning anything who need help affording life? Or am I confusing it with something else?

 

[43210]

For 2018 I had planned to put $24.5k into 403b and another $24.5k into 457b (total $49k), but now there would be a total limit of $24.5k instead of $49k, which means I could no longer get income down enough to get about $6k in EITC.

isn't EITC earned income tax credit for those barely earning anything who need help affording life? Or am I confusing it with something else?

It's based on "income" on lines 7 and 38 of Form 1040, which is gross income MINUS insurance, HSA, retirement etc.

 

[MichaelB]

Advocacy or speculation on budget measures is beyond the scope of this thread topic and discussion. Keeping the focus on the nuts and bolts of proposed changes to tax legislation and how they impact us is a more useful discussion.

 

[Souschef]

I just saw a sound byte on TV about how eliminating the medical deduction will hurt seniors.
What crap. First of all if a senior's income besides SS is below a certain amount, they do not even have to file a return
Secondly, the floor on medical deductions for seniors is 7.5% of AGI
If the standard deduction is increased, that will be more benefit.

 

[audreyh1]

I just saw a sound byte on TV about how eliminating the medical deduction will hurt seniors.
What crap. First of all if a senior's income besides SS is below a certain amount, they do not even have to file a return
Secondly, the floor on medical deductions for seniors is 7.5% of AGI
If the standard deduction is increased, that will be more benefit.

Medical deduction for seniors went up to 10% of AGI in 2017, matching everyone else.

 

[aja8888]

I just saw a sound byte on TV about how eliminating the medical deduction will hurt seniors.
What crap. First of all if a senior's income besides SS is below a certain amount, they do not even have to file a return
Secondly, the floor on medical deductions for seniors is 7.5% of AGI
If the standard deduction is increased, that will be more benefit.

Our OOP medical costs this year will exceed $40K. We are seniors and having a bad medical year. I'm really glad we are spending this in 2017 rather than next year with no chance of a deduction (if the reform passes as such).

We are not the only seniors that incur high OOP medical costs. I suspect many seniors will be in the same boat in future years. We are not cutting pills in half yet though.

 

[Ian S]

I thought running up the deficit was a big no-no. $1.5T is a lot of money even spread over 10 years.

 

[FIRE'd@51]

Secondly, the floor on medical deductions for seniors is 7.5% of AGI

As of 2017, it is 10% for everyone.

If the standard deduction is increased, that will be more benefit.

Not for someone with large ongoing medical expenses, e.g. a nursing home, who has to significantly increase his withdrawal from a TIRA to pay the bill. This was mentioned in the other (now Porky'd) thread.

 

[FIRE'd@51]

At least the Senate bill appears to get rid of that bizarre situation between about 78K and 90K of taxable income in which STCG are actually taxed at a lower rate than LTCG.

 

[pb4uski]

....I must admit that while these (proposed) changes are detrimental to me, they actually make things more fair and uniform, so I don't really have grounds for complaint (and I can adapt to the new rules). I hope other people can recognize when changes that are detrimental to them personally, are actually moving things more towards fairness and uniformity.

+1 but it seems that many only judge these things based on how it impacts them personally rather than based on common sense or equity and fairness.

 

[Senator]

Overall, this is a great plan for me. I do not make more than $500K, or have a $1M mortgage. I have an average value home.

My tax rate gets lowered.

The standard exemption for me goes up from $6,500 to $12,000+.

I lose my state income tax deduction, but that is more than offset by a lower tax rate and a higher personal exemption.

The property taxes are limited to $10K, I pay less than $2,500 now. I can still buy a second home, deduct them, and be under the $10K limit.

I do not have mortgage interest now, but sometimes I use my HELOC for short term loans. I can still deduct the interest amounts.

The exclusion of the sale of a home except once every five years may hurt, but I have never used it yet, so unlikely to affect me too negatively.

I am not sure about pass-through entities and income based on the article. I may have to restructure some businesses, or dissolve them to take full advantage of the new law. Either way, it appears to be OK. It appears a maximum tax rate of 25%, or maybe I can deduct 17.4% of the income?

I can definitely see how people with expensive houses with a large mortgage and high property taxes may lose some of the deductions.

I am ready for the changes.

 

[audreyh1]

I just saw a sound byte on TV about how eliminating the medical deduction will hurt seniors.
What crap. First of all if a senior's income besides SS is below a certain amount, they do not even have to file a return
Secondly, the floor on medical deductions for seniors is 7.5% of AGI
If the standard deduction is increased, that will be more benefit.

The Senate version keeps the medical deduction. I should have mentioned that earlier. Plus now the min is 10% of AGI.

It's not baloney.

Increasing the standard deduction helps seniors almost not at all as they lost their higher personal exemption. It would already be $23,800 in 2018 under the current tax system.

Why do you imagine seniors don't pay taxes? If a senior has other taxable income, and many do, and almost all of it goes to paying for expensive medical costs, loss of this deduction will create more financial hardship. Not everything is covered by Medicare, there is a LOT that is not.

 

[jebmke]

Overall, this is a great plan for me. I do not make more than $500K, or have a $1M mortgage. I have an average value home.

My tax rate gets lowered.

The standard exemption for me goes up from $6,500 to $12,000+.

I lose my state income tax deduction, but that is more than offset by a lower tax rate and a higher personal exemption.

The property taxes are limited to $10K, I pay less than $2,500 now. I can still buy a second home, deduct them, and be under the $10K limit.

I do not have mortgage interest now, but sometimes I use my HELOC for short term loans. I can still deduct the interest amounts.

The exclusion of the sale of a home except once every five years may hurt, but I have never used it yet, so unlikely to affect me too negatively.

I am not sure about pass-through entities and income based on the article. I may have to restructure some businesses, or dissolve them to take full advantage of the new law. Either way, it appears to be OK. It appears a maximum tax rate of 25%, or maybe I can deduct 17.4% of the income?

I can definitely see how people with expensive houses with a large mortgage and high property taxes may lose some of the deductions.

I am ready for the changes.

The standard deduction is "doubled" but the personal exemptions go away (at least in the House bill, I have not looked at the Senate bill). The net effect is about 15-20% increase in the deduction I think -- not "double."

 

[audreyh1]

Overall, this is a great plan for me. I do not make more than $500K, or have a $1M mortgage. I have an average value home.

My tax rate gets lowered.

The standard exemption for me goes up from $6,500 to $12,000+.

I lose my state income tax deduction, but that is more than offset by a lower tax rate and a higher personal exemption.

The property taxes are limited to $10K, I pay less than $2,500 now. I can still buy a second home, deduct them, and be under the $10K limit.

I do not have mortgage interest now, but sometimes I use my HELOC for short term loans. I can still deduct the interest amounts.

I am ready for the changes.

Senator - you might want to recalculate. You lost your personal exemption, so your standard deduction went from 10,650 to 12,000. Not the doubling you think.

For singles 65 and over its like 11,900 to 12,000. Pretty much the same.

 

[audreyh1]

For MFJ seniors (both over 65) standard deduction + personal exemption goes from $23,800 in 2018 under the current system to $24,000 standard deduction and no personal exemption under the new.

 

[BeachOrCity]

+1 but it seems that many only judge these things based on how it impacts them personally rather than based on common sense or equity and fairness.

I agree with the sentiment that i will take a personal hit if it is overall better for the country or economy.

My issue with this as it is proposed is they initially (as part of the corp taxcut) were also going to greatly reduce the transfer pricing of intellectual capital many corps use to avoid taxes, but when the corps complained they took that out. If i am going to pay more, i want real reform. If corp taxes are to be cut they need to reform the various loopholes such as carried interest, transfer pricing, intangible drilling etc. otherwise it becomes more of a give away.

Same goes for personal tax cuts such as conservation easements, and deductions for appreciated securities at stepped up rather than original basis. None of this was touched

Otoh, what is one persons loophole is another’s livelihood..... but if we are to truely reform, some of these things need to go.

 

[Golden sunsets]

Senator - you might want to recalculate. You lost your personal exemption, so your standard deduction went from 10,650 to 12,000. Not the doubling you think.



For singles 65 and over its like 11,900 to 12,000. Pretty much the same.

Also Senator you would claim the new standard deduction, OR write off mortgage interest, real estate taxes and medical expenses, etc, not both.




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