Release of final tax bill details

[Helena]

.

Now I have found conflicting info.

That it did eliminate the over age 65 and/or blind extra standard deduction.


" Increases the standard deduction to $12,000 for single filers, $18,000 for heads of household, and $24,000 for joint filers, while eliminating the additional standard deduction and the personal exemption. Provisions sunset at the end of 2025.

https://taxfoundation.org/conference-report-tax-cuts-and-jobs-act/


If this is correct, single seniors who don't itemize have lost $250 right out of the gate.

.

 

[43210]

The way I understand it, Rubio was holding out to get more of a refundable amount. So at the last minute, they raised the refundable amount of the credit from $1100 to $1400.

That's a completely separate issue to what my comment referred to.

 

[43210]

I scanned through the text. It doesn't look like you need earned income to get the refundable child credit, worth $1400 per child.

I'm pretty sure you are totally wrong about this. There has never been any suggestion by anyone that CTC would work the way you say. The calculation methods stay exactly the same, but with different numbers.

 

[audreyh1]

I get it that the latest tax proposal does away with the 15% bracket but I found no mention of the current favorable treatment of capital gains in the 10 and 15% brackets (ie zero percent tax rate on capital gains.) Is this going away?

No

The capital gains tax rate and brackets follow the House bill

The conference agreement follows the House bill and generally retains present-law maximum rates on net capital gains and qualified dividends.

And this is the House language near the end of the docs

Maximum rates on capital gains and qualified dividends
The provision generally retains the present-law maximum rates on net capital gain and qualified dividends. The breakpoints between the zero- and 15-percent rates (“15-percent breakpoint”) and the 15- and 20-percent rates (“20-percent breakpoint”) are based on the same amounts as the breakpoints under present law, except the breakpoints are indexed using the C- CPI-U in taxable years beginning after 2017. Thus, for 2018, the 15-percent breakpoint is $77,200 for joint returns and surviving spouses (one-half of this amount for married taxpayers filing separately), $51,700 for heads of household, $2,600 for estates and trusts, and $38,600 for other unmarried individuals. The 20-percent breakpoint is $479,000 for joint returns and surviving spouses (one-half of this amount for married taxpayers filing separately), $452,400 for heads of household, $12,700 for estates and trusts, and $425,800 for other unmarried individuals.

Therefore, in the case of an individual (including an estate or trust) with adjusted net capital gain, to the extent the gain would not result in taxable income exceeding the 15-percent breakpoint, such gain is not taxed. Any adjusted net capital gain which would result in taxable income exceeding the 15-percent breakpoint but not exceeding the 20-percent breakpoint is taxed at 15 percent. The remaining adjusted net capital gain is taxed at 20 percent.

As under present law, unrecaptured section 1250 gain generally is taxed at a maximum rate of 25 percent, and 28-percent rate gain is taxed at a maximum rate of 28 percent.

Effective date.−The provision applies to taxable years beginning after December 31, 2017.

 

[ERD50]

Since Estate Tax is still in place (with a 2x exemption) in this version, I assume that means that cost basis on assets are still stepped up to date-of-death?

I guess the only thing here that simplifies taxes (one of the goals I think), is that with a higher standard deduction, fewer people itemize, so fewer people have to fill out Schedule A (corrected my earlier mistake of Sched "B")? But it seems like the tax programs ask you for all that anyhow, as they can't "know" they don't need to info and to take the standard deduction until you enter it all. I can make an estimate and skip it if my estimate is below the threshold, because I understand the rules. So maybe that doesn't even simplify anything for most people?

The idea of reducing the number of brackets is a simplification (not done anyhow in this version), is a straw man. We could have an infinite number of brackets (based on an equation), and people would either use a tax table to look up their tax (as some do today), or a computer calculates it, and a an equation is easier than a look up table (I know, we used equations in place of look up tables back in the 80's with computers with very limited resources - K's of memory, not M's or G's).

Are medical expenses still deductible only when they exceed 10% of AGI? If so, I may not hit the $24K threshold, even with our high property taxes (edit - with cap on SALT, so no, I probably cannot itemize).

edit - found this in the linked document:

The medical expense deduction threshold is lowered to 7.5 percent for 2018, and reverts to 10 percent thereafter.

Most of this just seems like shuffling, not sure there is any point to most of it. I do like lowering corporate taxes, those are just paid by the consumer anyhow, and hurt our ability to compete worldwide. So I think that will stimulate business, jobs, and be good for the average Joe/Jolene. The rest is just 'meh' for me. Because of that, I'd actually prefer corp taxes to go to zero, but I guess that won't fly.

-ERD50

 

[gcgang]

I'm sure glad they've got the tax code simplified.

I'm anxiously awaiting tax time so I can fill out my postcard tax return.

 

[Helena]

The snip below is from the conference agreement. Based on this, it looks like the extra deduction is retained, as it was in the Senate bill, since it "follows the Senate amendment."

Edit to add: ooops, I see others already answered this question.

I appreciate you posting the text info. Thank you.

.

 

[audreyh1]

Stepped up basis was going to be allowed regardless of whether the estate tax was repealed or not.

And now it appears no repeal of the estate tax, doubling of exemptions, and resetting back to current (half) levels in 2026.

 

[PatrickA5]

I'm sure glad they've got the tax code simplified.

I'm anxiously awaiting tax time so I can fill out my postcard tax return.

They need to just call it a tax cut. There is almost no simplification. I supposed if you used to be able to itemize and now you can't, you can say your own taxes are simpler, but overall very little was done to simplify the code.

Looks like we might be a little better off. I'm still a little "fuzzy" on the $500 dependent credit. It looks like it only applies to dependents that don't qualify for the Child Tax Credit (i.e. dependents over 17). Is there any credit for the Taxpayer and Spouse? I think the house plan had a $300 credit for TP and Spouse.

 

[catotx]

I'm pretty sure you are totally wrong about this. There has never been any suggestion by anyone that CTC would work the way you say. The calculation methods stay exactly the same, but with different numbers.

You are right.

 

[FIRE'd@51]

I guess the only thing here that simplifies taxes (one of the goals I think), is that with a higher standard deduction, fewer people itemize, so fewer people have to fill out Schedule B? But it seems like the tax programs ask you for all that anyhow, as they can't "know" they don't need to info and to take the standard deduction until you enter it all. I can make an estimate and skip it if my estimate is below the threshold, because I understand the rules. So maybe that doesn't even simplify anything for most people?

Not to nitpick, but I believe you mean Schedule A.

You are right about the non-simplification. In a state like mine (VA), you can only itemize on the state return if you itemized on the Federal. It may be that if your itemized deductions are close but still under the 24K threshold, you may want to go ahead and itemize on the Federal even though it increases your Federal tax, if you can save more than that on the state. Hopefully, the tax programs will figure this out for you.

Are medical expenses still deductible only when they exceed 10% of AGI? If so, I may not hit the $24K threshold, even with our high property taxes (edit - with cap on SALT, so no, I probably cannot itemize).

edit - found this in the linked document:

"The medical expense deduction threshold is lowered to 7.5 percent for 2018, and reverts to 10 percent thereafter."

As I understand it, it is 7.5% for this year (2017) as well - see post #25 above.

 

[catotx]

The house bill repeals the exclusion for interest on Series EE savings bond used for qualified higher education expenses.

The conference agreement does not include the House bill provision.

 

[Calico]

I appreciate you posting the text info. Thank you.

.

You're welcome.

 

[ERD50]

Not to nitpick, but I believe you mean Schedule A.

Yes, thanks - got it in time to edit my earlier post.

-ERD50

 

[Helena]

.

Forbes article also says both the additional standard deduction and exemptions disappear into the "higher" standard deduction... except for a single senior that new deduction is NOT "higher" in 2018. It's $250 less.


" Additional Standard Deduction & Personal Exemptions. Currently, you can claim a $4,050 personal exemption for yourself, your spouse, and each of your dependents. Additionally, if you are over age 65, blind or disabled, you can tack on $1,300 to your standard deduction ($1,600 for unmarried taxpayers).

* Under all versions of the plan, including the conference bill, these will be "consolidated into this larger standard deduction" - meaning they disappear. "


https://www.forbes.com/.../its-begi...e-tax-reform-heres-whats-in-the-final-version

.

 

[RunningBum]

You are right about the non-simplification. In a state like mine (VA), you can only itemize on the state return if you itemized on the Federal. It may be that if your itemized deductions are close but still under the 24K threshold, you may want to go ahead and itemize on the Federal even though it increases your Federal tax, if you can save more than that on the state. Hopefully, the tax programs will figure this out for you.

Brilliant. This is why I pay my yearly dues to this place! I don't know how it'll be in the future, but last year, had the new plan been in place, I believe this method would've saved me over $200. I have doubts that the tax programs will figure it out since they do the Federal first, then the State, and they'd have to go back and redo both and compare the two sets of results. And that assumes I'd have bothered doing any of the itemized stuff, which I may have just skipped. Thank you.

 

[pb4uski]

Initial assessment comparing 2017 to 2018.... 2018 itemized deductions + personal exemptions are about $3,362 less than in 2017... no longer will itemize... and that in turn, reduces my Roth conversion by similar amount... but increase in top of 12% bracket is $1,500 higher than top of 15% bracket so that is $1,500... net impact is Roth conversion is $1,862 less and tax is $32 less.

Big deal... I'd prefer to convert more and pay the lousy $32 and be able to do Roth recharacterizations.

 

[Camellia]

As reported in the NYT the plan will not allow prepayment of 2018 property taxes in order to get a full deduction in 2017. Which I guess also means no bunching taxes every other year specifically to get over the new higher standard deduction.

 

[lucky penny]

I think I'll be paying a lot more, though I guess I won't know how much more until I do the calculations at tax time. In a high-tax state, last year my SALT deductions were way more than $10,000. Not moving though - living here suits me.

 

[pb4uski]

I'm not sure how I would prepay 2018 property taxes anyway since the amounts are not known and billed/paid until the 3rd and 4th quarters in the places that we pay property taxes. I would feel odd just sending them a check. If I had a bill and it was installment payments like where we used to live then I could see a possibility.

 

[43210]

I should clarify/correct my comments on Child Tax Credit and Additional Child Tax Credit?

I now realize that the Child Tax Credit is not restricted based on earned income.

It is just the Additional Child Tax Credit that is restricted based on earned income. This refundable credit is at most
15% * (earned income minus $2500) [that $2500 is changed from $3000, see form 8812]
and it is also to be at most
$1,400 per child
(this is the number Rubio/Lee were trying to maximize).
So it is and was the case that earned income plays a role, but only for the Additional Child Tax Credit (1040 L67) not the Child Tax Credit (1040 L52).

So it seems (and I'm not 100% sure) that a retiree with kids and no earned income, could not get any Additional Child Tax Credit (also not EITC), but can get Child Tax Credit, but only as a non-refundable credit, i.e. you subtract from your taxes, but only down to zero, not negative.

 

[audreyh1]

I'm not sure how I would prepay 2018 property taxes anyway since the amounts are not known and billed/paid until the 3rd and 4th quarters in the places that we pay property taxes. I would feel odd just sending them a check. If I had a bill and it was installment payments like where we used to live then I could see a possibility.

Must depend on the state. In TX, property taxes are billed in October, and you have until Jan 31 to pay without penalty. So you “pay ahead” simply by paying before Dec 31, or you bunch deductions by paying in Jan for prior year and Dec of current year. More like paying late for prior years taxes.

Is anyone really prepaying 2018 taxes?!?

 

[audreyh1]

Next year I plan to do annualized income method for estimated taxes as my income should be much lower compared to 2017. Isn’t that going to be fun with such big changes!

 

[Camellia]

Must depend on the state. In TX, property taxes are billed in October, and you have until Jan 31 to pay without penalty. So you “pay ahead” simply by paying before Dec 31, or you bunch deductions by paying in Jan for prior year and Dec of current year. More like paying late for prior years taxes.

Is anyone really prepaying 2018 taxes?!?

I was literally planning to send in my property tax payment tomorrow. City confirmed they would accept payment now, amount due was made available Dec 1. Not my plan anymore...

 

[pb4uski]

It looks like the $300/taxpayer family tax credit in the House bill didn't make the conference bill.... correct? That was pretty much the only savings that we would have seen.