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12-19-2017, 01:08 PM
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#341
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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Quote:
Originally Posted by audreyh1
...........Of course I don’t understand why some provisions are permanent and others temporary. Perhaps a scoring system was used. I have no idea.
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I believe that the temporary provisions are to keep the total cost of the bill within the limits that allow for a simple majority in the Senate to pass it.
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12-19-2017, 02:00 PM
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#342
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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Everything always changes. Deal with it. We all make our best choices on what we know and expect to change in the future.
Save your money and invest to the best of your abilities
__________________
Took SS at 62 and hope I live long enough to regret the decision.
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12-19-2017, 02:09 PM
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#343
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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[ADMIN HAT ON]
In the interest of keeping this thread open and available for a continuation of our interesting discussion of the tax bill, the moderator team is asking everyone to be careful not to drift into posts about future legislation and elections.
Please re-read your posts before you post them. Thank you!
[/ADMIN]
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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12-19-2017, 02:24 PM
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#344
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,413
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Quote:
Originally Posted by W2R
[ADMIN HAT ON]
In the interest of keeping this thread open and available for a continuation of our interesting discussion of the tax bill, the moderator team is asking everyone to be careful not to drift into posts about future legislation and elections.
Please re-read your posts before you post them. Thank you!
[/ADMIN]
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I agree to an extent, but it's important to point out that this legislation is in part subject to sunset provisions and those should be considered in anyone's planning for the future.
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12-19-2017, 02:28 PM
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#345
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,726
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Quote:
Originally Posted by Another Reader
I agree to an extent, but it's important to point out that this legislation is in part subject to sunset provisions and those should be considered in anyone's planning for the future.
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Sunset provisions are part of the tax bill, and have been clearly noted in the thread. W2R's request is (once again) to please limit discussion to the contents of the current bill.
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12-19-2017, 03:16 PM
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#346
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Recycles dryer sheets
Join Date: Nov 2017
Posts: 275
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Another summary/analysis
https://taxfoundation.org/final-tax-...ails-analysis/
One thing I haven't seen mentioned here is this:
"Changes to Business Taxes: ... Limits the deductibility of net interest expense to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA) for four years, and 30 percent of earnings before interest and taxes (EBIT) thereafter."
(Apparently this is part of the revenue impact balancing act.)
It doesn't affect our individual tax directly, but it affects investments. One thing I've been seeing on the web is discussion that this adversely affects junk bonds (the junkier, the worse) since junky issuers have high interest to income ratios.
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12-19-2017, 03:19 PM
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#347
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
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Quote:
Originally Posted by travelover
I believe that the temporary provisions are to keep the total cost of the bill within the limits that allow for a simple majority in the Senate to pass it.
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Sure, but they had to decide between which to sunset and which to make permanent.
__________________
Retired since summer 1999.
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12-19-2017, 03:20 PM
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#348
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2009
Posts: 5,308
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Two things:
Whether to itemize for 2017
The primary issue for me is going to whether this causes me to itemize for 2017. We had not been going to be able to itemize for this year or it was going to be only a small amount. So I had plan to bunch my 2017 property taxes into 2018 (they are about $4900 per year). And, under current law we would have been able to itemize in 2018.
But, with the new larger standard deduction with elimination of the exemptions - no amount of bunching will help us in 2018. So we definitely can't itemize for 2018.
So - I have looked again at 2017 now that the medical expense deduction is about 7.5% instead of 10%. That may make us eligible. At first I thought we wouldn't be as the biggest part of the deduction is for health insurance paid for a policy that covers me and our now non-dependent adult children. Ordinarily I couldn't deduct the premium that covers non-dependents.
But, I found something that says you can deduct it if the child would have been a dependent but for earning too much money. That applies to DD. We paid more than half of her expenses but she just barely has earned enough money (I think) to not allow us to claim her as a dependent. But, if we can deduct for her insurance premiums then we should be able to itemize in 2017 for the last time if we pay the property taxes before the end of this year.
Expiration of provisions
I have a question as to what the bill provides. My understanding is that the new brackets will expire in 2025 (or 2026 - not sure). Then the brackets and tax rates for each bracket go back to where they are now.
What about the increase of the standard deduction and getting rid of the exemptions? I assume that does not expire. Is that correct?
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12-19-2017, 03:30 PM
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#349
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Thinks s/he gets paid by the post
Join Date: Sep 2014
Location: The Great Wide Open
Posts: 3,804
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Quote:
Originally Posted by travelover
I believe that the temporary provisions are to keep the total cost of the bill within the limits that allow for a simple majority in the Senate to pass it.
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Same thing occurred a few years ago when the "Bush" tax cuts had to be voted on again, because of expiration.
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12-19-2017, 03:36 PM
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#350
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
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My understanding is that you cannot prepay 2018 state and local income taxes in 2017, but you can prepay 2018 property taxes and deduct them in 2017 if you pay them this year. Do I have that correct?
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12-19-2017, 03:41 PM
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#351
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2009
Posts: 5,308
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Another question. Anyone have any idea how quickly (if) home prices may decrease as a result of the fact so many fewer people will be able to itemize making the deduction for mortgage interest worthless for most people. (The limitation on SALT may also play a part).
That is the bill does retain mortgage interest deductions (up to mortages of I think $750k). We plan to sell our existing house and buy a house in 2018. My understanding is that in general home prices have been propped up (so to speak) by the existence of the mortgage interest (and to some extent property tax) deductions.
The deductions still exist. But, many people won't take them any more due to the increased standard deduction. Given that -- how quickly do you think house values will go down (if at all) because of the perception they are less valuable if you can't deduct interest?
Specifically I am wondering if the reduction in home sale prices will accelerate over the course of the year -- in which case it makes sense to sell ASAP.
On the other hand, it is possible that there might be an immediate decline as people panic but that the prices then rebound a bit as people realize that deductible of mortgage interest isn't that big a deal. If that is the case, then maybe it makes sense to wait a few months before listing.
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12-19-2017, 03:58 PM
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#352
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Quote:
Originally Posted by Katsmeow
Another question. Anyone have any idea how quickly (if) home prices may decrease as a result of the fact so many fewer people will be able to itemize making the deduction for mortgage interest worthless for most people. (The limitation on SALT may also play a part).
That is the bill does retain mortgage interest deductions (up to mortages of I think $750k). We plan to sell our existing house and buy a house in 2018. My understanding is that in general home prices have been propped up (so to speak) by the existence of the mortgage interest (and to some extent property tax) deductions.
The deductions still exist. But, many people won't take them any more due to the increased standard deduction. Given that -- how quickly do you think house values will go down (if at all) because of the perception they are less valuable if you can't deduct interest?
Specifically I am wondering if the reduction in home sale prices will accelerate over the course of the year -- in which case it makes sense to sell ASAP.
On the other hand, it is possible that there might be an immediate decline as people panic but that the prices then rebound a bit as people realize that deductible of mortgage interest isn't that big a deal. If that is the case, then maybe it makes sense to wait a few months before listing.
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Very few homes will have a mortgage larger than $500K or $750K. And $10K in property taxes are not the norm. I do not think you will see any decrease in the majority of homes.
If anything, it will limit new supply of homes and existing homes will increase in value.
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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12-19-2017, 04:19 PM
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#354
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Thinks s/he gets paid by the post
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 3,019
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Quote:
Originally Posted by Senator
Very few homes will have a mortgage larger than $500K or $750K. And $10K in property taxes are not the norm. I do not think you will see any decrease in the majority of homes.
If anything, it will limit new supply of homes and existing homes will increase in value.
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I know $10K in property taxes are high for the average of USA homes, but some states rely disproportionately on real estate taxes for funding local government. In the collar counties around Chicago, it doesn't take much to exceed $10K.
We are considering moving. We need to be cognizant of the taxes as much, if not more, than the purchase price.
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12-19-2017, 04:23 PM
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#355
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,346
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Quote:
Originally Posted by CRLLS
...In the collar counties around Chicago, it doesn't take much to exceed $10K.
We are considering moving. We need to be cognizant of the taxes as much, if not more, than the purchase price.
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I can see why with taxes like that. In 20 years I suppose you could spend as much, if not more, than the price of the house on taxes. Yikes!
__________________
When I was a kid I wanted to be older. This is not what I expected.
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12-19-2017, 04:24 PM
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#356
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2009
Posts: 5,308
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Quote:
Originally Posted by Senator
Very few homes will have a mortgage larger than $500K or $750K. And $10K in property taxes are not the norm. I do not think you will see any decrease in the majority of homes.
If anything, it will limit new supply of homes and existing homes will increase in value.
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Oh, I agree about most people not having a large mortgage and not having $10k in property taxes (although that $10k limitation is for ALL state and local taxes not just property taxes). That isn't the point.
The point is the fewer people with $300k or $400k mortgages will be itemizing because the threshold to itemized will be much higher than under current law. Most people with $300k or $400k mortgages will get zero benefit from the deduction simply because they will be taking the standard deduction. I am wondering if because of that home prices may decline.
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12-19-2017, 04:36 PM
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#357
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Quote:
Originally Posted by Katsmeow
The point is the fewer people with $300k or $400k mortgages will be itemizing because the threshold to itemized will be much higher than under current law. Most people with $300k or $400k mortgages will get zero benefit from the deduction simply because they will be taking the standard deduction. I am wondering if because of that home prices may decline.
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I would expect home prices overall to decline, because mortgages just effectively got more expensive, and most home buyers rely on a mortgage for the majority of the purchase price.
I also would expect higher end home prices to decline more with the $1M -> $750K limit reduction.
When will this happen? It really depends on how quickly home buyers understand the impact on affordability. I would expect some, maybe many, people will buy without understanding the impact and the find out at tax time that they made a mistake. But those with good honest realtors should be notified in the buying process.
On the other hand, sellers may not care that buyers have less affordable mortgages. So they may still ask what they're asking and refuse (or be unable to) drop their asking prices or accept lower bids.
So my guess is you could see an impact as soon as January, but I think what you might see first is just a slowdown in sales before prices actually drop. But I'm terrible at guessing the future.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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12-19-2017, 04:40 PM
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#358
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gone traveling
Join Date: Oct 2016
Posts: 255
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Quote:
Originally Posted by Katsmeow
I have a question as to what the bill provides. My understanding is that the new brackets will expire in 2025 (or 2026 - not sure). Then the brackets and tax rates for each bracket go back to where they are now.
What about the increase of the standard deduction and getting rid of the exemptions? I assume that does not expire. Is that correct?
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Pretty much everything that applies to individual taxes - including the std deduction change and exemption change - expires after tax year 2025. In 2026 we go back to the 'old way'.
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12-19-2017, 04:50 PM
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#359
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,362
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Quote:
Originally Posted by Curmudgeon
In 2026 we go back to the 'old way' have no idea what will happen.
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FIFY
__________________
I thought growing old would take longer.
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12-19-2017, 04:52 PM
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#360
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Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,906
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IMO the leverage provided by a low-interest mortgage outweighs the value of the mortgage tax deduction, so inability to deduct will not depress housing prices.
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