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Old 12-16-2017, 10:52 AM   #121
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Not really much impact to us. We have no mortgage but our property tax is over $10K. So we bunch deductions by doubling-up property tax every other year. The $10K limit effectively eliminates the bunching strategy for us going forward.

The new $24K std deduction is $2K lower than our average deductions+exemptions over the last 4 years. So all else being equal, our taxable income would go up by $2K. But in practice, we would just reduce our Roth conversion by that amount and stay at the top of the 15% (now 12%) bracket. So in effect, the $2K increase in taxable income is just deferred to RMD time. By then, it appears that the 22% rate goes back to 25%, so impact on tax liability is $500.

Offsetting that is the rate reduction from 15% to 12%. Based on our typical mix of ordinary income, qualified dividends, and capital gains, the savings is about $1200. So overall slightly positive, but I would have preferred the larger Roth conversion. I'll need to analyze whether it makes sense to convert into the new 22% bracket, given the reversion of these rates after 10 years, i.e. pay 22% now to avoid 25% later.
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Old 12-16-2017, 10:52 AM   #122
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Originally Posted by mpeirce View Post
I heard back from my CPA. He said



So us Ohio folk seem to still be OK prepaying our property taxes this year. (I expect I'll never itemize ever again - and I'm good with that!)

We normally get billed for property taxes in January, but the county web site has the estimated tax on their web site already. In the past when we've prepaid (for bunching purposes) it's been easy to get it (very close to) the right amount.
It use to be that our Ohio property tax bill would come around Christmas. The last few years is would sometimes be just into the next year. Our county (I can't speak for others) offered to email bills when available which we signed up for so we would have the choice of year to actually pay it. You may have that available or you may want to look on line to get the correct tax amount. Our county did a real estate value reassessment this year which may shift taxes a bit. YMMV
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Old 12-16-2017, 10:53 AM   #123
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[ADMIN hat on]The mod team is being overwhelmed by posts on this thread that are political, partisan, or related to class/race wars or other topics that our members clearly know are not appropriate for this forum. We are TRYING to keep the thread open so that some constructive discussion of the tax bill and how retirees can plan for tax efficiency under the new tax laws, may continue.

Please, please, please.... I would just ask that you THINK before you post. If you want to discuss the above or other incendiary topics, please do so at some other website. [/ADMIN hat]
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Old 12-16-2017, 10:54 AM   #124
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Has anyone noticed anything that the old law adjusted with inflation that the new law will not adjust but will let sit to become an "unintentional consequence" like happened with the AMT in the old law?
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Old 12-16-2017, 10:55 AM   #125
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To examine the effect of tax rates I did the following using the old and new brackets on taxable income, (excluding qualified dividends and capital gains) for the single rates
It looks like the percentage changes are:
taxable income %change (decrease) (1-new/old)
10k 2.3%
30k 15.4%
50k 15.7%
70k 14.3%
90k 11.5%
110k 10.2%
130k 12.3%
150k 8.12%

Taxable income is the result after itemized deductions or the standard deduction is removed (as well as taking qualified dividends and long term capital gains out)
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Old 12-16-2017, 10:56 AM   #126
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[ADMIN hat on]The mod team is being overwhelmed by posts on this thread that are political, partisan, or related to class/race wars or other topics that our members clearly know are not appropriate for this forum. We are TRYING to keep the thread open so that some constructive discussion of the tax bill and how retirees can plan for tax efficiency under the new tax laws, may continue.

Please, please, please.... I would just ask that you THINK before you post. If you want to discuss the above or other incendiary topics, please do so at some other website. [/ADMIN hat]
Well, you are doing a great job, because I haven't seen a single one of those posts!
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Old 12-16-2017, 11:02 AM   #127
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Originally Posted by meierlde View Post
To examine the effect of tax rates I did the following using the old and new brackets on taxable income, (excluding qualified dividends and capital gains) for the single rates
It looks like the percentage changes are:
taxable income %change
10k 2.3%
30k 15.4%
50k 15.7%
70k 14.3%
90k 11.5%
110k 10.2%
130k 12.3%
150k 8.12%

Taxable income is the result after itemized deductions or the standard deduction is removed (as well as taking qualified dividends and long term capital gains out)
This is not clear, are you saying a person with taxable income of 30K will pay 15.4% more in taxes ?
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Old 12-16-2017, 11:03 AM   #128
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Well, you are doing a great job, because I haven't seen a single one of those posts!
Thank you. I haven't counted but I think we have had to remove more posts than have been allowed to remain, so far this morning. This is just insane and that is why THREE members of the mod team have posted in the past fifteen minutes or so pleading with our members to not require us to close the thread.
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Old 12-16-2017, 11:04 AM   #129
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Yes, please lets stick to the nuts and bolts of the tax bill. Not the effect on health insurance, and not your approval or disapproval of the new bill as a matter of public policy. It is what it is, and the best we can do is figure out how we will deal with it. When you get yourself elected to Congress, you can change it. Until then, however, please stick to the matters at hand. The moderators have had to remove several editorial posts already. We don't want to close the thread, as it is quite useful for many.
Thanks for mentioning what was removed and why. I think that is helpful, otherwise threads get closed and the rest of us are sitting here wondering what happened, because we didn't see what you saw.

What happened to the "hot button" post warning? I thought that was useful, kind of like a "count to 10" before you post?

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Old 12-16-2017, 11:09 AM   #130
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What lower rates? They are essentially unchanged.
The calculator seems to only uses AGI for an input. It does not differentiate between LTCG/QD and ordinary income. IOW, I don't see where it uses the equivalent of Schedule D.
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Old 12-16-2017, 11:14 AM   #131
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I am so confused about all the details and haven't read half the posts here let alone the Bill itself.

FWIW, I just punched ran the "Max Lott Tax Calculator" using my 2016 AGI and I'll be paying less if this thing goes through (assuming I have same AGI for 2018 which is doubtful). The amount seems to be about what I had guesstimated before I saw that calculator mentioned here. (I do not itemize now (current renter), Single no dependents).
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Old 12-16-2017, 11:17 AM   #132
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Does anyone know how the pass through income deduction works? DW gets a modest stipend from her LLC law firm. This is taxable income (we pay self employment tax on it) on her 501K. From what I read this is pass through income, 20% of which is deductible. But in what manner is it deductible - aggregated with other itemized deductions or deducted from taxable income at the outset? With the larger standard deduction this may make a difference for us.
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Old 12-16-2017, 11:18 AM   #133
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+1 and if your locality has a fiscal year that is not the calendar year (say, july 1, 2017 to June 30, 2018) and you have been billed but the taxes are not yet due because the payments are in installments, then IMO you could make those installment payments dues in 2018 in 2017 and still claim the deduction.
I agree with your logic. Californian here, we paid the second installment of our 2017/2018 property taxes this past Monday (first day after the first installment due date). I hope it will be deductible in 2017, but no big deal if it is not.

We will itemize in 2017 and we will take the $24,000 standard deduction in 2018. Therefore, paying it in December 2017 MAY be beneficial, but we know that waiting until 2018 WILL NOT be beneficial.

(We do NOT have any intent to pay the first installment of our 2018/2019 property taxes, due December 2018, early)
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Old 12-16-2017, 11:20 AM   #134
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Has anyone noticed anything that the old law adjusted with inflation that the new law will not adjust but will let sit to become an "unintentional consequence" like happened with the AMT in the old law?
No - but the inflation adjustment will now be determined by the Chained-CPI, not the CPI-U. This is supposedly a less aggressive measure of inflation, so bracket creep may occur more quickly.
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Old 12-16-2017, 11:48 AM   #135
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On the individual AMT:

The AMT exemption for MFJ was raised to $109,400. It would have been $86,200 in 2018 otherwise. An increase of $23,200.

AMT is computed on your AGI before standard deduction and exemptions. If you are itemizing, then some deductions are allowed under AMT but others are not.

So depending on how much your standard deduction has increased to make up for the old standard deduction plus exemptions, the AMT exemption increase will be reduced by that.

Still, the $23K increase in AMT exemption should more than make up for a larger standard deduction and loss of personal exemptions.

They didn't say anything about the level at which you are taxed at 28% for AMT (versus 26%). This was $187,800 for 2017. Perhaps that has been left unchanged.

Quote:
Conference Agreement
The conference agreement temporarily increases both the exemption amount and the exemption amount phaseout thresholds for the individual AMT. Under the provision, for taxable years beginning after December 31, 2017, and beginning before January 1, 2026, the AMT exemption amount is increased to $109,400 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return), and $70,300 for all other taxpayers (other than estates and trusts). The phaseout thresholds are increased to $1,000,000 for married taxpayers filing a joint return, and $500,000 for all other taxpayers (other than estates and trusts). These amounts are indexed for inflation.
The conference agreement follows the House bill in repealing the corporate alternative minimum tax.
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Old 12-16-2017, 11:50 AM   #136
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Thank you. I haven't counted but I think we have had to remove more posts than have been allowed to remain, so far this morning. This is just insane and that is why THREE members of the mod team have posted in the past fifteen minutes or so pleading with our members to not require us to close the thread.
Wow! Well much thanks for the good work!
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Old 12-16-2017, 11:52 AM   #137
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The calculator seems to only uses AGI for an input. It does not differentiate between LTCG/QD and ordinary income. IOW, I don't see where it uses the equivalent of Schedule D.
Oh - I misread your comment. The calculator is ignoring income taxed at long term cap gains rates. Well that's not very useful!
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Old 12-16-2017, 11:54 AM   #138
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This is not clear, are you saying a person with taxable income of 30K will pay 15.4% more in taxes ?
Will pay that much less in taxes not more. It is a percentage decrease in taxes. (1-new/old)
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Old 12-16-2017, 12:01 PM   #139
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Does anyone know how the pass through income deduction works? DW gets a modest stipend from her LLC law firm. This is taxable income (we pay self employment tax on it) on her 501K. From what I read this is pass through income, 20% of which is deductible. But in what manner is it deductible - aggregated with other itemized deductions or deducted from taxable income at the outset? With the larger standard deduction this may make a difference for us.
My interpretation was 20% of the pass through income would get the corporate rate.. So, if you have a lot of pass through income(over 315k for joint return), 20% of your pass through income would be taxed at 21%, instead of a higher tax rate..

However, every time I read a description of that clause, it sounds different.

Someone please correct me if I'm wrong..
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Old 12-16-2017, 12:06 PM   #140
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[ADMIN hat on]The mod team is being overwhelmed by posts on this thread that are political, partisan, or related to class/race wars or other topics that our members clearly know are not appropriate for this forum. We are TRYING to keep the thread open so that some constructive discussion of the tax bill and how retirees can plan for tax efficiency under the new tax laws, may continue.

Please, please, please.... I would just ask that you THINK before you post. If you want to discuss the above or other incendiary topics, please do so at some other website. [/ADMIN hat]
A BIG thank you to all the mods for their hard work. The thread is very useful and it would be a shame to see it stopped due to folks who can't practice self-restraint.
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