Release of final tax bill details

[mpeirce]

I heard back from my CPA. He said

Remember property tax in Ohio is one year behind, the tax bill you will get now is for 2017.

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.

 

[audreyh1]

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.

And you are not in fact prepaying your property taxes. You might be paying them early with respect to dates with no late penalty. Paying a current year tax early (but after being billed) is different than prepaying taxes for a future tax year that hasn’t even been billed yet.

 

[FIRE'd@51]

I entered my actual 2016 1040 numbers into the Max Lott Tax Calculator, and the new tax rules would have cost me $1094 more!


Not a good sign!

I don't see where that calculator captures the lower rates on LTCG and Qualified Dividends. This may be the source of your increase.

 

[Golden sunsets]

For all who are thinking of prepaying property taxes not due until 2018, hopefully you aren't subject to AMT. My CPA said we wouldn't benefit from prepayment as our AMT would increase, negating any benefit of prepayment.

Upon advice from our accountant, we ran our bunching numbers through the AMT and find that we are OK.

 

[scrabbler1]

Trying to figure out how much I gain or lose from the tax bill is difficult although any gain or loss will likely be rather small.


The first thing I look at is the overall difference between the current law's standard deduction+personal exemption (SD+PE) versus the new higher law's standard deduction. Under current law, the SD+PE for single filers is $6,350+$4,050, or $10,400 for 2017, and would rise $100 or $150 in 2018 compared to the new law's SD of $12,000 for 2018. Not a huge difference, maybe $1,500.


The breakeven point is if my itemized deduction (ID) is slightly higher than the current SD by about $1,500, or about $7,900. It just so happens that my ID has for several years been in the range of this amount. Going forward, if my would-be ID exceeds the old SD, then I will come out behind. The main driver of the variability in my ID is medical expenses. They spiked bigtime 2 years ago when I was in the hospital. But rising HI premiums and some smaller, unforeseen medical bills, also contribute to smaller spikes.


But my ID includes the full amount of my local property taxes, something for which I receive a state tax rebate the following year. That rebate has to be included as ordinary income, unfortunately, instead of a negative expense, because as income it is part of the AGI (and MAGI, for ACA subsidy purposes). If my ID is not sufficiently higher than the SD, it doesn't pay to itemize because I see my ACA subsidy reduced. This is where bunching helped out, giving me a little added tax benefit by juicing up my ID every other year while taking the SD in the others. If I end up taking the SD every year, I won't have to worry about this. It would also keep me further away from the ACA subsidy cliff, although large, unexpected cap gain distributions such as what's coming my way before the end of this year would push me over it anyway.


So......if I get sicker during the year and run up some extra medical expenses, then I may bunch some other deductible expenses and itemize, pretty much the same game plan I have now. I'd just have to get a lot sicker and run up more bills than compared to current law. Pleasant thought, huh?

 

[Bir48die]

I think we're ok. Property taxes and income taxes should just beat the threshold. Many in our state will get hosed. The timing on retiring was beneficial in this case.

 

[gayl]

What happened to ACA? Was the penalty for not insuring removed?

 

[Golden sunsets]

I saw one question upstream on the $500 per filer credit that was in the original Senate version. Has that provision been retained or eliminated?

Found the answer to this question on page 43 of the conference report, page 566 of the pdf document. The $500 non refundable tax credit per qualifying non child dependent is retained in the final bill. and does not phase out until income exceeds $400,000 for couples. I believe this means I can shave $1,000 off my 2018 tax bill.

 

[JDARNELL]

What happened to ACA? Was the penalty for not insuring removed?

Removed beginning 31 dec 2018 just before the penalty goes into affect.

 

[mpeirce]

What happened to ACA? Was the penalty for not insuring removed?

Yes

 

[ripper1]

In addition to retaining the medical deduction, the final bill appears to reduce the threshold to 7.5% for all taxpayers for tax years 2017 and 2018 (page 63), afterwhich the threshold goes back to 10%. This provision is retroactive to the beginning of this year.

Well, standard deduction be damned.....I will still be itemizing....thanks to 20,000 dollars in medical premiums. Thank you for dropping our healthcare....City of Chicago.

 

[audreyh1]

I don't see where that calculator captures the lower rates on LTCG and Qualified Dividends. This may be the source of your increase.

What lower rates? They are essentially unchanged.

 

[audreyh1]

What happened to ACA? Was the penalty for not insuring removed?

No, but it was set to $0.

 

[easysurfer]

Removed beginning 31 dec 2018 just before the penalty goes into affect.

Yes

My understanding is the mandate requiring insurance is considered a tax, so removing the mandate is considered a tax cut.

 

[jetpack]

Can someone explain this line:
"The plan would set a 20 percent business income deduction for the first $315,000 in income earned by pass-through businesses."

Is there a calculator on how much a sole proprietor would save by switching to a pass-through?

 

[audreyh1]

Removed beginning 31 dec 2018 just before the penalty goes into affect.

It was actually not removed, but set to $0.

Like “the penalty shall be $0”.

I thought that language was interesting. Not, there is no penalty, but that there is and it is $0.

 

[PatrickA5]

Found the answer to this question on page 43 of the conference report, page 566 of the pdf document. The $500 non refundable tax credit per qualifying non child dependent is retained in the final bill. and does not phase out until income exceeds $400,000 for couples. I believe this means I can shave $1,000 off my 2018 tax bill.

If the $1,000 you're referring to is for you and your spouse (if MFJ), that's not the way I read it. It states:

"The credit is further modified to temporarily provide for a $500 nonrefundable credit for qualifying dependents other than qualifying children. The provision generally retains the present-law definition of dependent."

I believe this means that if you have a "dependent" who is NOT a Qualifying Child (for the Child Tax Credit), then you get $500 for that dependent. An example would be a dependent child over 17, or a parent that you can claim as a dependent. The taxpayer and spouse are never considered dependents.

 

[Pilot2013]

We, are the perfect example of "you can't satisfy everyone".

 

[MichaelB]

The penalty associated with the individual mandate was removed. This is not the thread to discuss impact on health insurance. Let's stick to taxes, please. (Impact and details, not editorials. )

 

[Gumby]

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.

 

[Cobra9777]

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.

 

[bingybear]

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

 

[W2R]

[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]

 

[Tadpole]

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?

 

[meierlde]

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)