Release of final tax bill details

[Helena]

[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]

It's sometimes difficult and confusing but it's a very timely and important subject. I appreciate all the helpful informative posters and the mods who keep us on topic.

.

 

[Gotadimple]

I wasn't referring to the tax rate.

Under current IRS rules, my tax exempt amount in 2018 would be $12,250.00 [which includes standard deduction $6500, additional over age 65 standard deduction $1600 and personal exemption $4150.] So the tax bill's $12,000.00 standard deduction by itself [assuming they have eliminated the extra over age 65 deduction] would be $250 less. I lose $250 right out of the gate.


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Circling back on the aged and blind standard deduction. It is retained according to the PDF (footnote #13). Here's the footnote from the page 537:

13 For 2017, the additional amount is $1,250 for married taxpayers (for each spouse meeting the applicable criterion) and surviving spouses. The additional amount for single individuals and heads of households is $1,550. An individual who qualifies as both blind and elderly is entitled to two additional standard deductions, for a total additional amount (for 2017) of $2,500 or $3,100, as applicable.

So a single individual who does not itemize and who is aged can claim:
$12,000 + $1,550= $13,550
If they were also blind, the total would be $12,000+$3,100=$15,100

With limits on some itemized deductions on Schedule A, this might be enough to eliminate the need to file Schedule A.

HTH,
Rita

 

[Walt34]

I'm not worried about it. If the bill becomes law, it will be up to the analysts and software engineers at the major tax prep companies to figure out how to implement it. Not my problem.

That's kind of my position on it too. There's nothing I can do about it other than perhaps writing an email to my congresscritters and what will be will be.

 

[jimnjana]

I wasn't referring to the tax rate.

Under current IRS rules, my tax exempt amount in 2018 would be $12,250.00 [which includes standard deduction $6500, additional over age 65 standard deduction $1600 and personal exemption $4150.] So the tax bill's $12,000.00 standard deduction by itself [assuming they have eliminated the extra over age 65 deduction] would be $250 less. I lose $250 right out of the gate.


.

You don't lose 250 if your tax rate has gone down. You will have 250 more dollars taxed at a lower rate.

 

[43210]

I'm not worried about it. If the bill becomes law, it will be up to the analysts and software engineers at the major tax prep companies to figure out how to implement it. Not my problem.

I don't understand this. There are all kinds of decisions I can make and control for tax year 2018 and beyond, starting right now. It's definitely worth understanding it when some tax-planning can save thousands of dollars. If you wait for tax software for tax year 2018 (maybe a year from now) it could be too late. You might realize you went over some number by $1, and so cost yourself thousands of dollars (there are many such "cliffs", as well as steep phaseins and phaseouts). You could say "oh well, there was nothing that could have been done", but it wouldn't change the fact that a $1 mistake cost thousands of dollars.

 

[Helena]

Circling back on the aged and blind standard deduction. It is retained according to the PDF (footnote #13). Here's the footnote from the page 537:

13 For 2017, the additional amount is $1,250 for married taxpayers (for each spouse meeting the applicable criterion) and surviving spouses. The additional amount for single individuals and heads of households is $1,550. An individual who qualifies as both blind and elderly is entitled to two additional standard deductions, for a total additional amount (for 2017) of $2,500 or $3,100, as applicable.

So a single individual who does not itemize and who is aged can claim:
$12,000 + $1,550= $13,550
If they were also blind, the total would be $12,000+$3,100=$15,100

With limits on some itemized deductions on Schedule A, this might be enough to eliminate the need to file Schedule A.

HTH,
Rita

Interesting... thank you for posting this.

This opens up another can of worms.

Why give the over age 65 extra standard deduction amounts for 2017 ?

The IRS has already issued the inflation-indexed new amounts for 2018.

The tax bill would come into effect in 2018... but are we expected to use these 2017 amounts ??

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[Walt34]

I don't understand this. There are all kinds of decisions I can make and control for tax year 2018 and beyond, starting right now. It's definitely worth understanding it when some tax-planning can save thousands of dollars.

Well, as the lawyers say, "that depends".

For us, our main sources of income are a pension and SS, with a dribble of dividends. We haven't itemized for almost two decades. I have an IRA but I haven't touched it yet and don't plan to for another five years. While we do have property taxes, compared to some others I've seen here ours are laughably low.

So as I see it there really isn't much, if anything, that I can do to manipulate income and expenses for tax purposes.

 

[43210]

Tax calculators

Some people have mentioned this tax calculator.
Tax Plan Calculator by Maxim Lott
Read the disclaimers "About this site and FAQ"
Tax Plan Calculator by Maxim Lott
and be aware that it is super-simplified with very basic features, though it appears correct in the hypothetical case where these few features were the entire tax code. Real results can be drastically different, so you need to know all the additional features that apply to you and realize they are not in this calculator. And for comparison, some major news websites have been having tax calculators that are more limited and error-prone, without disclosing the limitations.

 

[easysurfer]

....

I'm not worried about it. If the bill becomes law, it will be up to the analysts and software engineers at the major tax prep companies to figure out how to implement it. Not my problem.

+1.

I'm not gonna get a shook up and wait til all the possible future law gets sorted out by the folks you mentioned .

 

[socca]

Well, as the lawyers say, "that depends". ... So as I see it there really isn't much, if anything, that I can do to manipulate income and expenses for tax purposes.

My pass-through income "is what it is" - no option for playing around with it to minimize taxes. Other folks might be in a different boat.

Pass-through income is a substantial part of my overall income, so I will be very interested to see how this all plays out.

 

[Helena]

You don't lose 250 if your tax rate has gone down. You will have 250 more dollars taxed at a lower rate.

I would lose $250 in tax exemption. As for the tax rate, the lowest tax rate I would use is the same as it was, 10%.

But thanks to information posted here [and in spite of what both Forbes and Tax Foundation news articles say], it appears the over age 65 extra deduction is retained.

.

 

[gayl]

Some people have mentioned this tax calculator.
Tax Plan Calculator by Maxim Lott
Read the disclaimers "About this site and FAQ"
Tax Plan Calculator by Maxim Lott
and be aware that it is super-simplified with very basic features, though it appears correct in the hypothetical case where these few features were the entire tax code. Real results can be drastically different, so you need to know all the additional features that apply to you and realize they are not in this calculator. And for comparison, some major news websites have been having tax calculators that are more limited and error-prone, without disclosing the limitations.

Hey! I got a warning that 4 moderators are monitoring this-- thanks!

Thanks to those reading all 1095 pgs but I'm just trying to understand highlights (basic income, ACA, some deductions) missing a lot (cap gains / losses, dividends, interest, whether paying 110% of 2017 taxes satisfies 2018 estimates, ect)

That said, this is becoming clear as mud . Guess it'll keep TurboTax etal busy ramping up the estimate tax portion of their program or I'll need to see a CPA to know how much in estimates to pay next go-round

 

[mystang52]

Property tax collectors around the country are providing early billing for 2017 taxes normally billed and due in 2018.

My understanding of property tax prepayment, one can only prepay property taxes when the county allows and accepts that specific prepayment. That is, it's not just a credit balance on the account. The country usually does that with a prepayment invoice or similar document.

Here in New Jersey I get my Property Tax bills in August, for quarterly payments due August, November, February (2018) and June of 2018. So, I already know what my tax due amount is.
I believe I read every comment on this thread. I plan to prepay my February and June 2018 tax bills this week, and let the dust settle. I believe I can deduct the payments. If I'm wrong, then I lost a little bit of interest by prepaying. But at least I protected myself, and can research this at a more leisurely pace before I file my 2017 taxes.

 

[gayl]

I'm paying April 10th taxes 12/29 as this looks like it's my last year itemizing

 

[GrayHare]

The various expiration dates of the new rules means we'll be repeating this sort of tax uncertainty several times during the decade ahead. Yes, taxes are tweaked year to year, but now major elements are scheduled to turn into a pumpkin at future midnights. I'd prefer to see less FUD built into the new rules.

 

[friar1610]

Some people have mentioned this tax calculator.
Tax Plan Calculator by Maxim Lott
Read the disclaimers "About this site and FAQ"
Tax Plan Calculator by Maxim Lott
and be aware that it is super-simplified with very basic features, though it appears correct in the hypothetical case where these few features were the entire tax code. Real results can be drastically different, so you need to know all the additional features that apply to you and realize they are not in this calculator. And for comparison, some major news websites have been having tax calculators that are more limited and error-prone, without disclosing the limitations.

I realize the results of this simplified calculator will vary significantly. But in my own case, it came very close to nailing my actual 2016 tax bill. So I'm going to take its estimate of about a $500 saving as pretty accurate.

 

[retiredunder50]

the 2018 personal exemptions were supposed to be $4150 and the standard deduction amount for married filing joint was supposed to hit $13,000. Just putting these in for reference when comparing the new 2018 plan's effect

 

[RE2Boys]

I don't think I've itemized deductions in at least 20 years, ever since I paid off my mortgage.
Had always planned to either use qualified charitable distributions as RMDs when over 70 or contribute to a Donor Advised Fund at some "future" point to cover future charitable giving. This tax bill has finally motivated me to decide 2017 is the time to itemize deductions and fund a DAF as it will be impossible, given my finances, to ever itemize again. Maybe an opportunity again in 2025, but some provisions may become permanent in the meantime.

Last night I frantically searched for verbiage regarding interest exclusion from taxation if used for qualified educational expenses and was ecstatic that that option will be avialable in the future. Even though income a bit to high to take full advantage of this benefit in 2017, I was ready to move fast in cashing some EE bonds and deposit into a 529 plan. A third of both my sons education expenses were in these EE bonds. I'll have to make it happen in 2018.

 

[Cobra9777]

Did you factor in the loss of $8,300 of personal exemptions for you and your spouse?

Yes.

 

[clifp]

I think the confusion may be that the exemptions have been eliminated and the standard deduction expanded to compensate - and that is the language you quoted. But the over 65/blind is not covered by the eliminated exemptions as it was an additional standard deduction, not an exemption.

I read the relevant section twice and I am still confused.

So over 65 and blind gets an additional deduction of $6,700 or $12,000 or what?

Edit: It was answered by GotAdimple an additional $1550 for blind and seniors.

 

[camfused]

LTCG rates

I have Googled around and cannot seem to find a clear answer on what the new LTCG/Dividends rates will be. Can someone please post them, or point me to them? Thanks.

 

[pb4uski]

No change.

 

[audreyh1]

The various expiration dates of the new rules means we'll be repeating this sort of tax uncertainty several times during the decade ahead. Yes, taxes are tweaked year to year, but now major elements are scheduled to turn into a pumpkin at future midnights. I'd prefer to see less FUD built into the new rules.

As far as I can tell all the changes that have expirations, have the same expiration date of 2026, and then revert to the current system.

except for the 7.5% of AGI medical deduction threshold which is only for 2017 and 2018. Then it goes back to 10%.

Not all the changes expire.

 

[audreyh1]

LTCG rates

I have Googled around and cannot seem to find a clear answer on what the new LTCG/Dividends rates will be. Can someone please post them, or point me to them? Thanks.

No change.

No changes to the long-term capital gains tax rates and thresholds from the current system except that they created an independent threshold for the 20% bracket and it is perhaps no longer tied to the tax tables. The 15% bracket tracks the tax table for now as the $77,400 is the top of the 12% bracket for MFJ and half that for single. But the 37% bracket starts at $600K for MFJ, whereas the 20% capital gains tax bracket is set to $479,000 which matches the old system.

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

And the House bill said:

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.

 

[meierlde]

The various expiration dates of the new rules means we'll be repeating this sort of tax uncertainty several times during the decade ahead. Yes, taxes are tweaked year to year, but now major elements are scheduled to turn into a pumpkin at future midnights. I'd prefer to see less FUD built into the new rules.

The same thing happend a couple of times for the GW Bush tax cuts during the Obama admin. Recall the end of 2012 issue with the expiration of the bush tax cuts and some companies paying dividends early.