House version or Senate version

[ripper1]

I know it is not law and do not want to speculate but wondering who here think the current drafting of house or senate version of tax plan is better for them. I would say the house version because the 12% bracket is extended to 90k whereas the senate version of 12% bracket only goes to 77.4k after which you end up in the 22.5 bracket.

 

[pb4uski]

Probably not different enough to justify burning any brain cells on. Sorry.

 

[43210]

There's a lot more to it than the brackets.

For me, house is better because the senate proposes to get rid of separate limits for 401k/403b and 457b, so I could tax-shelter $24.5k less. Also they propose to impose the 10% early withdrawal penalty on 457b's just like the other plans (instead of not having the penalty on 457). These changes make things more "fair" though worse for me, so I'm okay with it.

[mod edit]

 

[43210]

Probably not different enough to justify burning any brain cells on. Sorry.

For me, my AGI with the senate plan would be 3 or 4 times as much as my AGI with the house plan! Very different!

 

[Midpack]

Probably not different enough to justify burning any brain cells on. Sorry.

+1. If they pass something it’ll be different anyway. And I’m not interested in what’s best for me, I’m interested in what’s best for ALL concerned. Porky will be along eventually...

 

[ripper1]

Probably not different enough to justify burning any brain cells on. Sorry.

To me 12.6k more to keep under the 12% is plenty enough to burn brain cells on.

 

[devans0]

I ran our numbers to see what truth there is on the claims. I did so on our fixed income and then including our investment income. Either way, we will be paying much more in taxes, thousands more. The bull in the China shop approach doesn't allow people to adjust their circumstances.

Also, the proponents spin doesn't meet my smell test. I can't believe that I am that much of an outlier on this.

 

[43210]

+1. If they pass something it’ll be different anyway. And I’m not interested in what’s best for me, I’m interested in what’s best for ALL concerned. Porky will be along eventually...

I can't help myself, making contingency plans for the various scenarios - it's like a hobby. I realize it'll all get changed again, but I feel like it's been worthwhile thinking about various tax strategies. There's (at least) two very different versions of 2018 for me, depending on what the final version is.

 

[MBAustin]

I've decided it's not worth wasting energy or brain cells on "what if-ing" this tax bill. When something is finally signed into law, I'll deal with it then. Right now my brain cells are working on Thanksgiving and Christmas plans and that's plenty for them!

 

[Ronstar]

....Porky will be along eventually...

History shows you to be correct. But stay on topic as to the specifics of each proposal and how they affect you - then the discussion may continue. Stay away from talk about “fairness”, and away from anything partisan.

 

[REWahoo]

I've decided it's not worth wasting energy or brain cells on "what if-ing" this tax bill.

+1

I'm still not convinced a tax bill will actually pass, and if it does, no way will it contain the same provisions everyone here is spending time strategizing.

 

[aaronc879]

If a bill is signed would it be effective for 2018?

 

[Spock]

I'm engineering myself to the top of the bottom bracket.

For apples-to-apples comparison, I'll use the same income in 2018 as I'll have in 2017 because the average wage earner is not going to be able to increase income to make take advantage of more headroom in a given tax bracket.

The (current) house plan saves me a whopping $13 dollars a year (increases std ded but increases the tax rate 20% from 10% to 12%) I'll try not to spend it all in one place.

The senate plan would save me $320 on the same income... (increases std ded AND keeps rate at 10%). With that I can take my wife out for breakfast at the diner once a month... not exactly a game changer for Joe Sixpack.

While I was a trickle down believer, Megacorp has kabillions of cash in hand now that they are not investing. Plus at todays interest rates Megacorp can borrow what they want for almost free... cutting their tax rate by almost 1/2 is not going to suddenly incent them to spend more on liveware or hardware (IMHO).

Neither plan is going to get the voters in "fly over America" excited.

 

[scrabbler1]

Because I am on the edge between bunching versus not bunching deductions into 2017-2018, and the key "bunchable" deduction is state income taxes, I need to have a game plan before the end of 2017 so I will know when to make my 4th quarter estimates state income tax payment, in December or early January.

 

[audreyh1]

The Senate version preserves the medical expense deduction. This does not impact many people, but for a few it is huge.

You still have to get above 10% AGI and expenses have to exceed the new bigger (combined) standard deduction for it to reduce taxes. So the bar is pretty high.

 

[audreyh1]

If a bill is signed would it be effective for 2018?

The bills specifically say for 2018 on, so I think the answer is yes.

 

[gayl]

I'll venture in, we've run DS/DD/me:
♤ me - I don't itemize so about the same
♡ DS - House better than Senate, worse under both (MFJ 3kids, itemizes)
◇ DD - Low income, better with House
♧ GS1 - will have 7-10k SL on graduation, no idea but think House, actually no sure what he makes (FT student / employee)

 

[David1961]

Does either version talk about changing the tax rates for dividends or long-term capital gains?

 

[audreyh1]

Does either version talk about changing the tax rates for dividends or long-term capital gains?

No.

 

[AndyS]

I tend to think the final bill will end up looking a little bit more like the current Senate version than the current House version .... and whatever that ends up being the House will vote for it. Too much political credibility on the line not to pass something and the margins for passage are slimmer in the Senate than in the House.

But it's not done yet.

 

[scrabbler1]

The Senate version preserves the medical expense deduction. This does not impact many people, but for a few it is huge.

You still have to get above 10% AGI and expenses have to exceed the new bigger (combined) standard deduction for it to reduce taxes. So the bar is pretty high.

Getting rid of the med expense deduction only worsens the unequal treatment of HI premiums between those in group plans through their employers versus individual plans. Those in group plans, even if they don't itemize, are always able to deduct 100% of their share of the total premiums via payroll deduction, an above-the-line deduction. Those of us in individual plans can deduct only the portion of their premiums which exceed 10% of AGI. This means most of my HI premiums are paid using after-tax dollars even if I am able to itemize.

 

[PatrickA5]

Our household will be temporarily better off with the House bill due to the $300 credits for my dependent DS who is in college but doesn't get the Child Tax Credit. Also, the house bill has $300 credits for TP and spouse. These go away after 5 years I think. House bill hurts a little by not having a 10% bracket, but helps because the 12% bracket goes up to $90K which will allow higher Roth conversions for us. I've calculated we're about $700 better off from the House bill vs the Senate bill. Both would give us decent tax reductions.

When asked if every middle class household would see a tax break, one congressman stated every family of 4 that makes 55K will pay zero taxes. That's probably right assuming the child tax credit and the $300 credit for both taxpayers. Of course it didn't answer the question, either.

I've done some calculating to see where we'll end up because that's just the way I am. I agree with others that it's probably not worth the brain cells to do these figures until the final bill is passed (if ever).

 

[LRDave]

Without getting to the porky threshold, I opine that there is <50% chance any bill gets passed. So to me, not worth my time calculating.

 

[gayl]

Without getting to the porky threshold, I opine that there is <50% chance any bill gets passed.

+1

 

[ripper1]

The Senate version preserves the medical expense deduction. This does not impact many people, but for a few it is huge.

You still have to get above 10% AGI and expenses have to exceed the new bigger (combined) standard deduction for it to reduce taxes. So the bar is pretty high.

Even getting the medical deduction back, SALT, and mortgage interest deduction gets me to just under 24k. I get knocked out of the box without the 2 exemptions worth an additional 8k.