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Old 12-16-2017, 07:23 PM   #201
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Originally Posted by Cobra9777 View Post
That makes sense, but it's not a "small tax increase for us". Your tax is down on the same income under the new law. Correct?
One would think so but it isn't. Below is the same table but with the Roth conversion the amount under the new law in both cases.

  Current     Conference   
  Roth Conv Rate Tax   Roth Conv Rate Tax
0% bracket 5,278 0% -   1,916 0% -
10% bracket 19,050 10% 1,905   19,050 10% 1,905
15%/12% bracket 4,535 15% 680   7,897 12% 948
Total 28,863   2,585   28,863   2,853
   9.0%   9.9%

Note the tax is $268 higher, as follows:

Lost deductions due to SALT limitation of $3,362 * 12% marginal rate = $403 increase in tax
Favorable impact in rates............................... $4,535 * (15%-12%) = $136 reduction in tax

Net impact............................................ ........................................ $268 increase in tax
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Old 12-16-2017, 07:32 PM   #202
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Originally Posted by audreyh1 View Post
Yes, I believe HELOC interest and interest on a second home mortgage will no longer be deductible under the new bill. I don't think there is any grandfathering either.
I just checked, and it appears that the 2nd home mortgage still qualifies.

Mortgage value is limited to $750K, compared to $1M currently and $500K as proposed earlier. HELOC interest will not be deductible at all, first or 2nd home.

None of the above will affect me, but can be of importance to RE resale value in some markets. Overall, I don't know how the new tax will affect me personally, and there's not a lot I can do about it anyway.

PS. At first look, it appears my Fed tax may vary by a few hundred bucks. Nothing much to worry or rejoice over.
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Old 12-16-2017, 07:36 PM   #203
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Originally Posted by pb4uski View Post
Not sure I woudl rely on those calculators... modeling your taxes in a worksheet will give you a more reliable result.
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Originally Posted by FIRE'd@51 View Post
I don't see where that calculator captures the lower rates on LTCG and Qualified Dividends. This may be the source of your increase.
Yes, I think this calculator is too simple to be of value to me.
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Old 12-16-2017, 07:40 PM   #204
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Originally Posted by NW-Bound View Post
I just checked, and it appears that the 2nd home mortgage still qualifies.

Mortgage value is limited to $750K, compared to $1M currently and $500K as proposed earlier. HELOC interest will not be deductible at all, first or 2nd home.

None of the above will affect me, but can be of importance to RE resale value in some markets. Overall, I don't know how the new tax will affect me personally, and there's not a lot I can do about it anyway.
Sorry - I must have read the House section and thought it was still in the Conference Agreement. The Conference Agreement makes no mention of a second mortgage.

Quote:
Conference Agreement
The conference agreement provides that, in the case of taxable years beginning after December 31, 2017, and beginning before January 1, 2026, a taxpayer may treat no more than $750,000 as acquisition indebtedness ($375,000 in the case of married taxpayers filing separately). In the case of acquisition indebtedness incurred before December 15, 2017162 this limitation is $1,000,000 ($500,000 in the case of married taxpayers filing separately).163 For taxable years beginning after December 31, 2025, a taxpayer may treat up to $1,000,000 ($500,000 in the case of married taxpayers filing separately) of indebtedness as acquisition indebtedness, regardless of when the indebtedness was incurred.

Additionally, the conference agreement suspends the deduction for interest on home equity indebtedness. Thus, for taxable years beginning after December 31, 2017, a taxpayer may not claim a deduction for interest on home equity indebtedness. The suspension ends for taxable years beginning after December 31, 2025.

Effective date.−The provision is effective for taxable years beginning after December 31, 2017.
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Old 12-16-2017, 08:04 PM   #205
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Well, I'm sure that I'll be significantly effected no matter what the end result is. I've got no mortgage on my primary res, but a significant mortgage on my second home. I've itemized forever, and we've got rentals, a small business other than the rentals, significant charitable contributions (although I just did a DAF to get out of that business).

But having said that, I'm going with the inimitable Mickey Rivers. "I don't get upset over things I can't control, because if I can't control them, there's no use getting upset. And I don't get upset over things I can control, because if I can control them, what's the use in getting upset?" I'll see how it works out in 2018, then adjust my game and use whatever loopholes I can find. And there will be loopholes, because this is not simplification. And I'll probably learn about most of them here, because y'all are excellent sources. So keep working on it, and I'll check back in a year or so and take advantage of your genius.
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Old 12-16-2017, 09:31 PM   #206
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If I'm understanding it correctly, going forward the deduction of State, Local and Property (new acronym: SLAP) taxes are being capped at a combined total of $10,000. Since on Sched A "Foreign Taxes Paid" is grouped with the SLAP taxes, I'm wondering if Foreign will be part of the combined total $10,000 deduction limit...
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Old 12-16-2017, 11:15 PM   #207
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If I'm understanding it correctly, going forward the deduction of State, Local and Property (new acronym: SLAP) taxes are being capped at a combined total of $10,000. Since on Sched A "Foreign Taxes Paid" is grouped with the SLAP taxes, I'm wondering if Foreign will be part of the combined total $10,000 deduction limit...
Note that unless there was a change there is always the foreign tax paid credit as an alternative. As a credit dollar for dollar is better than a deduction as the IRS notes here:https://www.irs.gov/individuals/inte...t-or-deduction It is in general better to take a credit than a deduction for foreign taxes.
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Old 12-17-2017, 12:17 AM   #208
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Originally Posted by pb4uski View Post
One would think so but it isn't. Below is the same table but with the Roth conversion the amount under the new law in both cases.

Current Conference
Roth Conv Rate Tax Roth Conv Rate Tax
0% bracket 5,278 0% - 1,916 0% -
10% bracket 19,050 10% 1,905 19,050 10% 1,905
15%/12% bracket 4,535 15% 680 7,897 12% 948
Total 28,863 2,585 28,863 2,853
9.0% 9.9%
Note the tax is $268 higher, as follows:

Lost deductions due to SALT limitation of $3,362 * 12% marginal rate = $403 increase in tax
Favorable impact in rates............................... $4,535 * (15%-12%) = $136 reduction in tax

Net impact............................................ ........................................ $268 increase in tax

Nice how the table worked... I cannot get them to look like that

BUT, the increase in tax looks to be 100% due to the loss of SALT.... without this limitation the taxes would be lower...

So anything that becomes taxable will have a higher rate only because of loss of SALT which is what has been said by people on TV.... that some will pay a bit more for the loss of a deduction....
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Old 12-17-2017, 03:24 AM   #209
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I assume with the higher standard deduction and limits on SLP, mortgages etc, the idea is less people will be itemizing, so thatís the simplicity part, otherwise I donít see it.
I also assume that if they donít pass it by next week it wonít affect 2018, you canít pass a tax bill in the same year it takes affect.
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Old 12-17-2017, 04:20 AM   #210
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.

Useful information in this WSJ article

"What GOP Tax Plan Means for Your Favorite Deductions"


Here's what it says about the over age 65 deduction.


" What about the additional standard deductions for the elderly and blind?

The bill keeps them in place. For 2018, the additional standard deduction for people 65 and older is $1,300 for each partner of a married couple and $1,600 for a single person.

Thus, if each spouse is above 65, the additional standard deduction is $2,600 in 2018. If one spouse is 66 and the other is 60, the additional standard deduction is $1,300.

Thereís also an additional standard deduction for taxpayers who are legally blind. For 2018, it is $1,600 for a single person and $1,300 for a married taxpayer. If both spouses are blind, the additional standard deduction would be $2,600.

Taxpayers who are elderly and blind can take both additional standard deductions."


More at link about pre-paying property taxes, etc

https://www.wsj.com/articles/what-go...ons-1513453149

.
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Old 12-17-2017, 06:26 AM   #211
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I also assume that if they don’t pass it by next week it won’t affect 2018, you can’t pass a tax bill in the same year it takes affect.
Why not? United States v. Carlton, 512 U.S. 26 (1994), seems to suggest otherwise. (https://www.law.cornell.edu/supct/html/92-1941.ZO.html).
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Old 12-17-2017, 06:41 AM   #212
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I also assume that if they don’t pass it by next week it won’t affect 2018, you can’t pass a tax bill in the same year it takes affect.
Yes you can. It’s happened before. Since the process is already well underway they can easily do it. Note that at least one provision is in effect from Nov 2 2017 since it was first passed by one chamber. This is not unusual.
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Old 12-17-2017, 07:52 AM   #213
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It appears that I had about $16k in SALT last year, so about a $6k impact. I am assuming that the property tax includes real estate and other (vehicles, etc. that we have here in SC). Will have to create a spreadsheet to see if the bracket % changes offset.
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Old 12-17-2017, 07:58 AM   #214
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Originally Posted by GrayHare View Post
If I'm understanding it correctly, going forward the deduction of State, Local and Property (new acronym: SLAP) taxes are being capped at a combined total of $10,000. Since on Sched A "Foreign Taxes Paid" is grouped with the SLAP taxes, I'm wondering if Foreign will be part of the combined total $10,000 deduction limit...
Acronym is SALT... state and local taxes.... property tax is also a local tax.
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Old 12-17-2017, 08:02 AM   #215
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Nice how the table worked... I cannot get them to look like that

BUT, the increase in tax looks to be 100% due to the loss of SALT.... without this limitation the taxes would be lower...

So anything that becomes taxable will have a higher rate only because of loss of SALT which is what has been said by people on TV.... that some will pay a bit more for the loss of a deduction....
Table was just copied and pasted from Excel.

Yes, absent SALT changes there would have been ta savings due to change in rates from 15% to 12%.

I think the "cost" of SALT will be the lost deductions times the marginal tax rate (12% in my case but higher for many people).
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Old 12-17-2017, 08:04 AM   #216
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... I also assume that if they donít pass it by next week it wonít affect 2018, you canít pass a tax bill in the same year it takes affect.
There is nothing that says that you can't pass a tax bill in the same year it takes effect.... it has happened many times in the past.
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Old 12-17-2017, 08:24 AM   #217
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Sorry to digress to what has undoubtedly been covered numerous times but I have lost track of what happened to the medical deduction. Is it still out of the final compromise?
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Old 12-17-2017, 08:37 AM   #218
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Page 373 through 375 of the Joint Explanatory Statement covers the present law and the Senate proposal on Cost Basis of Securities. And thankfully concludes that the Senate proposal is not included in the conference agreement.
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The conference agreement does not include the Senate amendment provision.
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Old 12-17-2017, 08:38 AM   #219
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Sorry to digress to what has undoubtedly been covered numerous times but I have lost track of what happened to the medical deduction. Is it still out of the final compromise?
No, it's there. The AGI requirements have been reduced to 7.5% for 2017 and 2018, and go back to 10% thereafter. No additional restrictions.
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Old 12-17-2017, 08:40 AM   #220
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Nice how the table worked... I cannot get them to look like that
You need tabs to get things to space in columns. Copying and pasting from a spreadsheet or another html table usually works.
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