Release of final tax bill details

[Another Reader]

[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]

Well, you are doing a great job, because I haven't seen a single one of those posts!

 

[Sunset]

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
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)

This is not clear, are you saying a person with taxable income of 30K will pay 15.4% more in taxes ?

 

[W2R]

Well, you are doing a great job, because I haven't seen a single one of those posts!

Thank you. I haven't counted but I think we have had to remove more posts than have been allowed to remain, so far this morning. This is just insane and that is why THREE members of the mod team have posted in the past fifteen minutes or so pleading with our members to not require us to close the thread.

 

[ERD50]

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.

Thanks for mentioning what was removed and why. I think that is helpful, otherwise threads get closed and the rest of us are sitting here wondering what happened, because we didn't see what you saw.

What happened to the "hot button" post warning? I thought that was useful, kind of like a "count to 10" before you post?

-ERD50

 

[FIRE'd@51]

What lower rates? They are essentially unchanged.

The calculator seems to only uses AGI for an input. It does not differentiate between LTCG/QD and ordinary income. IOW, I don't see where it uses the equivalent of Schedule D.

 

[prototype]

I am so confused about all the details and haven't read half the posts here let alone the Bill itself.

FWIW, I just punched ran the "Max Lott Tax Calculator" using my 2016 AGI and I'll be paying less if this thing goes through (assuming I have same AGI for 2018 which is doubtful). The amount seems to be about what I had guesstimated before I saw that calculator mentioned here. (I do not itemize now (current renter), Single no dependents).

 

[donheff]

Does anyone know how the pass through income deduction works? DW gets a modest stipend from her LLC law firm. This is taxable income (we pay self employment tax on it) on her 501K. From what I read this is pass through income, 20% of which is deductible. But in what manner is it deductible - aggregated with other itemized deductions or deducted from taxable income at the outset? With the larger standard deduction this may make a difference for us.

 

[Niuatoputapu]

+1 and if your locality has a fiscal year that is not the calendar year (say, july 1, 2017 to June 30, 2018) and you have been billed but the taxes are not yet due because the payments are in installments, then IMO you could make those installment payments dues in 2018 in 2017 and still claim the deduction.

I agree with your logic. Californian here, we paid the second installment of our 2017/2018 property taxes this past Monday (first day after the first installment due date). I hope it will be deductible in 2017, but no big deal if it is not.

We will itemize in 2017 and we will take the $24,000 standard deduction in 2018. Therefore, paying it in December 2017 MAY be beneficial, but we know that waiting until 2018 WILL NOT be beneficial.

(We do NOT have any intent to pay the first installment of our 2018/2019 property taxes, due December 2018, early)

 

[audreyh1]

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?

No - but the inflation adjustment will now be determined by the Chained-CPI, not the CPI-U. This is supposedly a less aggressive measure of inflation, so bracket creep may occur more quickly.

 

[audreyh1]

On the individual AMT:

The AMT exemption for MFJ was raised to $109,400. It would have been $86,200 in 2018 otherwise. An increase of $23,200.

AMT is computed on your AGI before standard deduction and exemptions. If you are itemizing, then some deductions are allowed under AMT but others are not.

So depending on how much your standard deduction has increased to make up for the old standard deduction plus exemptions, the AMT exemption increase will be reduced by that.

Still, the $23K increase in AMT exemption should more than make up for a larger standard deduction and loss of personal exemptions.

They didn't say anything about the level at which you are taxed at 28% for AMT (versus 26%). This was $187,800 for 2017. Perhaps that has been left unchanged.

Conference Agreement
The conference agreement temporarily increases both the exemption amount and the exemption amount phaseout thresholds for the individual AMT. Under the provision, for taxable years beginning after December 31, 2017, and beginning before January 1, 2026, the AMT exemption amount is increased to $109,400 for married taxpayers filing a joint return (half this amount for married taxpayers filing a separate return), and $70,300 for all other taxpayers (other than estates and trusts). The phaseout thresholds are increased to $1,000,000 for married taxpayers filing a joint return, and $500,000 for all other taxpayers (other than estates and trusts). These amounts are indexed for inflation.
The conference agreement follows the House bill in repealing the corporate alternative minimum tax.

 

[audreyh1]

Thank you. I haven't counted but I think we have had to remove more posts than have been allowed to remain, so far this morning. This is just insane and that is why THREE members of the mod team have posted in the past fifteen minutes or so pleading with our members to not require us to close the thread.

Wow! Well much thanks for the good work!

 

[audreyh1]

The calculator seems to only uses AGI for an input. It does not differentiate between LTCG/QD and ordinary income. IOW, I don't see where it uses the equivalent of Schedule D.

Oh - I misread your comment. The calculator is ignoring income taxed at long term cap gains rates. Well that's not very useful!

 

[meierlde]

This is not clear, are you saying a person with taxable income of 30K will pay 15.4% more in taxes ?

Will pay that much less in taxes not more. It is a percentage decrease in taxes. (1-new/old)

 

[jetpack]

Does anyone know how the pass through income deduction works? DW gets a modest stipend from her LLC law firm. This is taxable income (we pay self employment tax on it) on her 501K. From what I read this is pass through income, 20% of which is deductible. But in what manner is it deductible - aggregated with other itemized deductions or deducted from taxable income at the outset? With the larger standard deduction this may make a difference for us.

My interpretation was 20% of the pass through income would get the corporate rate.. So, if you have a lot of pass through income(over 315k for joint return), 20% of your pass through income would be taxed at 21%, instead of a higher tax rate..

However, every time I read a description of that clause, it sounds different.

Someone please correct me if I'm wrong..

 

[Calico]

[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]

A BIG thank you to all the mods for their hard work. The thread is very useful and it would be a shame to see it stopped due to folks who can't practice self-restraint.

 

[Amethyst]

LOL well said

Y 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. .

 

[mpeirce]

Much thanks from me as well. There is a lot of actionable information on this subject here.

Are the problematic postings from established members (who should know better) or newbies?

 

[W2R]

Much thanks from me as well. There is a lot of actionable information on this subject here.

Are the problematic postings from established members (who should know better) or newbies?

You're welcome. Our mod team is dealing with it with our usual discretion, and just wanted to make a public plea to our members to please watch what they post.

 

[JoeWras]

These threads have been extremely useful to my planning. With ER finally looming next year, the timing is really important.

Oh, and it has also gotten me off my duff and into reading the actual bill. I haven't done something like that in a while!

As usual, the "collateral improvement" to me is hearing you all speak out loud about your strategies. I learn something every day on these threads.

Thank you!

 

[Helena]

But as I understand it the "additional standard deduction for age or blindness" has been eliminated, as other posters have pointed out. Am I correct?

Sent from my iPad using Early Retirement Forum

I am still somewhat confused about this myself. I have seen conflicting information on the internet, but at present I am unable to access the actual bill on line myself.

.

 

[catotx]

Another change is that interest from HELOC can no longer be deducted. This makes keeping a HELOC for living expenses less useful (for those who wants to keep income low for ACA purposes).

 

[Helena]

not if the marginal tax rate they pay goes down.

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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[Helena]

Ugh. The additional standard deduction remains.

REWahoo my reading is that it is retained. The language is in the above post.

I hope you're right !!

.

 

[Helena]

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 tried that Lott tax calculator last night but it did not ask if I was over 65... so that also confused me [if the extra over age 65 deduction was retained.]

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[socca]

Does anyone know how the pass through income deduction works?

I read this part of the bill, but I don't understand it. The bill seems to specifically exclude treating this as an adjustment to total income (AGI: 2016 1040 Line 37). Perhaps the intention is to somehow directly reduce total income (TI: 2016 1040 Line 22). If so, how? Don't know.

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.