Tax Cut savings calculator

[Alan]

If any desktop TurboTax users want a more exact calculator than the NYT one, I noticed that TTax has updated their What-If form for 2018.

As I expected, we are in the 25% of taxpayers that will be paying more. With the exact same inputs, $668 in 2017 vs $5403 in 2018 means a whopping 685% increase for us.

To get to the What-If tool in TurboTax:
- press Ctrl+2 (Cmd+2 on a Mac) or choose Forms from the View menu
- click the Open Form icon then start typing "what-if" in the search box and select What-if Worksheet when it appears
- check the box at the top of the what-if form to copy column 1 to column 2
- check the box in column 2 to use 2018 tax rates

Thanks for this, never tried the TT what-if tool before . For us it shows a big drop in taxes for the same income in 2018. Pensions + QDIV's + Roth conversion+ $40k Cap gains + $29k interest.

In 2017 we cashed out the last of our I-Bonds and sold a bunch of equities to buy a house. 2018 will have a lot less interest and cap gains so I may well decide to accelerate my Roth conversions.

 

[USGrant1962]

As I expected, we are in the 25% of taxpayers that will be paying more.

I don't know where you got the idea that 25% will see tax increases. Virtually every analysis I've seen says ~5% will see tax increases - even the left-leaning Tax Policy Center says 5%.

Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act | Full Report | Tax Policy Center

 

[cathy63]

I don't know where you got the idea that 25% will see tax increases. Virtually every analysis I've seen says ~5% will see tax increases - even the left-leaning Tax Policy Center says 5%.

Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act | Full Report | Tax Policy Center

First sentence of the NYT article linked in the original post is "The Republican tax bill would cut taxes for about 75 percent of filers in 2018."

Doesn't really matter if we're in the bottom 25% or the bottom 5% though. I can make a few changes and get the amount we'll owe down a little bit, but there's absolutely no way to get it anywhere close to being a tax cut for us.

 

[RunningBum]

First sentence of the NYT article linked in the original post is "The Republican tax bill would cut taxes for about 75 percent of filers in 2018."

Couldn't there be 20% that see no change, leaving 5% to see an increase?

 

[beowulf]

No change means no increase or decrease in taxes, no matter how small. If you define it a little more loosely, let’s say $100 in either direction, I think the 25% number for no change would work well. Just a guess, but it makes sense. Unless I missed something, the NYT calculator has only broad brush estimates. It doesn’t allow for the input of any details. It shows a roughly $2K cut for us. I know that isn’t possible as several significant deductions we take have either disappeared or been reduced. Not sure we will be able to itemize for 2018 and have no idea where that will leave us. When we finish with our 2017 return, I’ll try the TT what if calculator. That might give us a better idea of where we’ll be at tax time in 2019.

 

[CaptTom]

It's going to be interesting to see how this all plays out next spring. A lot of people who don't pay attention to withholding are going to be shocked and feel like they're paying more even though they might actually be paying less.

I'm also curious to see how many people are affected this way. I can only speak for myself; my withholding went down significantly more than my taxes will.

If my case is typical, I can foresee a lot of anger. I guess the idea is it'll hit half way between the mid-term and presidential elections, so the political fallout is minimized. But it seems unnecessary to mislead taxpayers.

I'm glad I checked my numbers, but still feel bad for those who are in for an unhappy surprise at tax time.

 

[Just_Steve]

Had to pay feds $1500 this year but doing the what-if shows a $2000 decrees so looks like a good deal to me.

Thank you @cathy63, didn't know how to do this.

 

[meierlde]

One interesting tidbit that could help if folks would say if they are in a high state/local tax state or a low one. The 10k limit could make a big difference there. Also if they are loosing exemptions because they have dependent over 17. (The new tax credit is worth the equivalent of a 5700 exemption for someone in the 35 percent bracket and more if in lower brackets)

One of these things has to be happening to folks if they have a constant income, as if you look at taxable income (i.e. after deductions etc) the average rate has typically gone down 13% for folks in the middle income ranges. (Below 35% bracket)

 

[beowulf]

Those in high state and local tax states, like NY and NYC, will really be hurt. Those who live on LI are further hurt by the high property taxes. A family living on LI in a $600K house would pay about $14K in RE taxes (depending on what jurisdiction they live in) at least $10K in NYS taxes and one heck of a lot in sales taxes. I have no idea how folks in CA, MA, etc., are going to cope with the tax increases. I’m pretty sure I read that CA and NY are going to try some end runs that will somehow make taxes charitable contributions or something like that, but I can’t imagine how that would work.

 

[Alan]

For myself no State taxes, standard deduction taken in 2017

 

[Morgan22]

I'm in MA. We normally itemize. (Itemized deductions and personal exemptions added up to about $26k each year.) For 2018 we will take the $24k standard deduction. Everything else being the same we will owe $3k less in Federal taxes. The reduction of the tax brackets make a big difference.

 

[jazz4cash]

I don't know where you got the idea that 25% will see tax increases. Virtually every analysis I've seen says ~5% will see tax increases - even the left-leaning Tax Policy Center says 5%.



Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act | Full Report | Tax Policy Center

I live in a high tax state and will pay more. Hard to believe I'm in such a select group (5%). The underwithholding will make things worse. Anecdotally I've heard several local tax planners anticipating shock and awe next tax season. The impact in 2027 cited in the report above was a shock to me:
Compared to current law, 5 percent of taxpayers would pay more tax in 2018, 9 percent in 2025, and 53 percent in 2027.

 

[pb4uski]

SALT limit will impact us by about $2,600.... but it is really a moot point because even with no SALT limit the new standard deduction exceeds our itemized deductions so SALT will really have no impact on us.... the main impact to us is that the $24k new standard deduction is less than our 2017 itemized deductions and exemptions by $3,400.

 

[Nature Lover]

If any desktop TurboTax users want a more exact calculator than the NYT one, I noticed that TTax has updated their What-If form for 2018.

As I expected, we are in the 25% of taxpayers that will be paying more. With the exact same inputs, $668 in 2017 vs $5403 in 2018 means a whopping 685% increase for us.

To get to the What-If tool in TurboTax:
- press Ctrl+2 (Cmd+2 on a Mac) or choose Forms from the View menu
- click the Open Form icon then start typing "what-if" in the search box and select What-if Worksheet when it appears
- check the box at the top of the what-if form to copy column 1 to column 2
- check the box in column 2 to use 2018 tax rates

Thank you for posting this Cathy63. I was working on my 2017 taxes in TT and the TT what-if tool was helpful in not only reviewing the likely effect of the new tax bill, but for determining my planned 2018 Federal estimated tax payments.

I did have to play with the inputs a bit before getting a satisfactory and reasonable outcome. One of the findings of my review is that I may end up taking the standard deduction for Federal Taxes, and itemizing deductions for State Taxes. The what-if tool (for Federal)/est tax options (for State) est taxes show this combination is likely to produce the best 2018 outcome for me (the smallest increase in overall income taxes).

BTW, my preliminary online research suggests that using a different deductions approach for State Taxes is legal here in California; however, it appears that in some states, if you take the standard deduction on your Federal return, you must take the standard deduction on the State return; and similar for itemizing. Worth a look, especially if you're an itemizer who will be losing deductions no longer allowed for Federal returns under the new law.

NL

 

[jazz4cash]

My state just announced they expect a large increase in collections next year as unintended side effect from federal changes. Not sure if it's just due to requiring consistency in using std vs itemized or change to SALT deduction. I was expecting this. The state claims they will find a way to offset the increase.

 

[USGrant1962]

My state just announced they expect a large increase in collections next year as unintended side effect from federal changes. Not sure if it's just due to requiring consistency in using std vs itemized or change to SALT deduction. I was expecting this. The state claims they will find a way to offset the increase.

Here's a discussion of state conformance with the new Federal tax law. https://taxfoundation.org/state-individual-income-tax-code-conform-federal-tax-code/

The main reason that most "conforming" states will see an increase in revenue is that the feds reduced marginal rates, and partially offset that with tightened deductions. If states conform with the new AGI/deductions, etc. and don't reduce their marginal rates, their tax collections will of course increase. They are conforming with the tax base-broadeners without conforming with the lowered tax brackets.

 

[PatrickA5]

I ran the "what if" TT calculator and it says we're saving around $1,600. However, I don't see anywhere on the worksheet the $300 credit for an over 17 dependent. Not sure why the worksheet doesn't include it. It might not be quite ready yet.

 

[SecondCor521]

I ran the "what if" TT calculator and it says we're saving around $1,600. However, I don't see anywhere on the worksheet the $300 credit for an over 17 dependent. Not sure why the worksheet doesn't include it. It might not be quite ready yet.

I thought the credit was $500.

 

[meierlde]

I ran the "what if" TT calculator and it says we're saving around $1,600. However, I don't see anywhere on the worksheet the $300 credit for an over 17 dependent. Not sure why the worksheet doesn't include it. It might not be quite ready yet.

there is a blank that asks you to enter all the credits expected, it does not break them down. (on page 2) so you have to enter the totals, because nowhere on the form does it have the dependents ages etc to determine if it is a child under 17 or otherwise.

 

[SevenUp]

I ran the "what if" TT calculator and it says we're saving around $1,600. However, I don't see anywhere on the worksheet the $300 credit for an over 17 dependent. Not sure why the worksheet doesn't include it. It might not be quite ready yet.

One might think the TT program would be good enough to increment all the ages by one, but apparently not: you have to make the correct entries for rows E and F in the "Credits Smart Worksheet."

The spreadsheet at https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/ - if one doesn't mind spreadsheets - seems more straightforward, but that will be in the eye of the beholder.