Federal Tax Cuts Delivered for us - your experience?

[Beer-man]

I'm not sure the impact of the tax law changes, but I just talked to our tax guy. We owe some to Fed and are getting some back from State. It nets out to less than $100 either way.



I knew this was one of the few places I could celebrate being that close to breaking even and people would get it.

Haha well done!

 

[gerntz]

My taxable income was ~ 20k higher due to no personal exemptions and capping my tax deductions. I ended up paying 2% more as a % of AGI due to the lower rate.

However, I got bailed out by having a higher child credit and my daughter started school this year and I got a $5k credit. If I had no kids I would have been hurt by the "tax cut" but came out OK with kids and school. I think I could have had the education credit under the old rule, so I guess I broke even under the new law. At least until my kids age out, which will be before the 10 years of the legislation.

I think that the thinking that goes into income tax law is that kids a) cost money to raise & b) are worthwhile to society as a whole. Net, the credit.

 

[audreyh1]

I thought I heard that the tax cut legislation for individuals was now permanent.

No, it was not made permanent.

 

[misanman]

We manage AGI to stay under the IRMAA surcharge so it is within $1,000 the last two years. Effective tax rate for 2017 was 15.2%. For 2018 it is 12.85%. Total federal tax is down this year by $3,750 and our refund is $80.

 

[SecondCor521]

I thought I heard that the tax cut legislation for individuals was now permanent.

Not yet. There are proposals to do so, and I think other temporary tax measures in the past have become indefinite. But most provisions related to individual income tax in the TCJA expire on 12/31/2025.

 

[eytonxav]

The standard deduction gave us an additional $1500 refund this year compared to 2017 refund on the same income and identical withholding %s.

 

[gwraigty]

Our tax liability for 2018 was about $2,000 less than 2017 on slightly higher taxable income. No refunds. We usually owe.

 

[kgtest]

FED effective rate rose by +4.14% and overall effective rate including state, SS, Medicare all taxes paid out of check-refunds... rose 3.54%. Reason being, I essentially went out of business. Filing status change, and itemized deduction went to standard... Made a little more income but AGI really only went up 1.17%...
so yes I am unfortunate lol. I'd rather have a tax problem then an income problem.
Add insult to injury, MegaCorp pulled all raises for 2019...so far....that *might change.
Since we are still accumulating and working with a young family, it seems counter intuitive. I consider myself working middle class (the economic engine of the countries growth, GDP and ability to reduce the deficit), but I just got taxed...whereas my DF who only claims SS and Pension, got a nice little tax break while his investment accounts grow until RMD. So the rich get richer on the back's of the middle class, you're welcome pops, I'll keep payin in my share
I still have goals though, Max 401ks, 5k in broker, 1500 in HSA, 1500 in 529 and if there is any room dump some in Roth. This journey is tough and real.

 

[ziggy29]

Good discussion, but let's try to steer clear of slogans and sayings common to political rhetoric so we can keep it going.

 

[HarveyS]

Our tax bill went up this year because our total income was 19% higher this year than 2017, due to a windfall stock transaction and logging on the family farm. Our taxable income was 23% higher than last year, but our effective tax rate (total income/tax) dropped from 14.2% to 12.2%.

Shouldn't the comparison be between MAGI/tax as the deductions have changed dramatically for us in high SALT states? I think I'm suggesting Line 38/tax not line 22/tax.
Thoughts?

 

[joeea]

I knew this was one of the few places I could celebrate being that close to breaking even and people would get it.

Nice!

Luck? Or terrific planning?

 

[Philliefan33]

Shouldn't the comparison be between MAGI/tax as the deductions have changed dramatically for us in high SALT states? I think I'm suggesting Line 38/tax not line 22/tax.

Thoughts?

I don’t know what the correct comparison is. The way I look at it, changes in the deductions are part of the tax code that affect how much of our income we keep.

 

[pj.mask]

We made out like a bandit. Income went up 10%, taxes went down 15% (both compared to 2017).

I think when I calculated maximum benefit (as a % decrease) it was in the $350-400k year income range.
Increasing the child credit income limit to 400k (from ~150k?) helped.

Just more money to savings for the next 6 years. Considering the debt and growing deficit it’s going to be hard to get these rates again while I’m working.

 

[Rex]

Incredible comparison......2017 vs 2018

Income was down 8% (all W2 and interest/dividend income)
2017 Tax Rate = 20%
2018 Tax rate = 12%

(Did not get stuck w/AMT this year, Got the solar panel deduction, no more itemized deductions and did not have to pay interest penalty for not giving the IRS more money up front)

Taxes were so much easier this year with the higher standard deduction
First refund since Reagan was President!

And we moved to Florida so the state income tax rate of zero was another plus.

Yes, these tax changes delivered for us and it's the best way to enter FIRE in 2019!

Doing the happy dance here and seems as though the tax changes were geared to help working folks....for a change.

 

[audreyh1]

AMT went away for most people - a huge reduction in the number of people paying AMT due to significantly higher phaseout thresholds. This is our case.

Some people however were paying AMT due to high deductions that were not qualified deductions under AMT. Now some of those deductions are limited, so that also changed the AMT game.

From CNN money:

Only about 200,000 tax filers are expected to owe the AMT in 2018, dramatically fewer than the 5.25 million who likely would have under the old tax law, according to estimates from the Tax Policy Center.

 

[HarveyS]

update: I am happy to report that my earlier assessment was incorrect, and the tax cut delivered more for me than I estimated once the accountant ran the numbers.
2015 and 2018 incomes were very close (within 1%). Fed tax rate (total tax due / total income) dropped 5.9% from '15 to '18 (2016 and 2017 income was much lower than '15 or '18 so I don't use that to compare as tax brackets impact could cloud the data)
Looking at total tax due divided by AGI, the drop was 5.6%

Part of the benefit: I got the AMT noose off my neck.

I'm off to blow that dough

 

[calmloki]

Actually surprised: overall, dividing taxes by income we paid 26.8% for 2017 and after we add to what we've already paid will pay 25% for 2018. While our income went up our federal tax component, which was 17.68% in 2017, went down to 15.32% for 2018. We pay state taxes in California and Oregon; each of us is a resident in one of those states, and while my Oregon taxes were high hers were higher. A funny thing: her AGI was $8056 higher than mine but her taxes were $8213 higher!

Was happy to see the 20% qualified business pass through applied to our rentals. Kind of envious of the tax rates and ability to tailor income that people who mostly hold stocks have, but don't want the tax tail to wag the income dog.

 

[audreyh1]

Hey - a new surprise!

I didn't expect to get 20% deduction off my REIT dividends - so only 80% taxable!

Not that it made a huge difference, but that was a pleasant surprise.

 

[Markola]

AGI went up about $5,000, state taxes up about $500, federal taxes up about $1,000. All that for a whole lotta nothin’ for us, apparently.

 

[MarieIG]

I heard from the accountant tonight. What a relief.

We made more this year, and in spite of losing the SALT; and two capital gains bombs, we are paying less tax. Accountant said that was due to the change in tax brackets coupled with us not having to pay the ATM.

Also, I raised with holdings due to the change in the tax law, so

 

[GrayHare]

Unsure yet, probably it'll be about the same as 2017. Turbotax is still updating itself at least weekly, and presumably those updates can change some tax calculation on some form somewhere. Don't want to submit my taxes before the software is finalized.

 

[swakyaby]

2018 was my first year of retirement, and my taxes sure reflected that. My federal taxes decreased $73,200 compared to 2017, and my state taxes decreased $22,400. All in all, I paid $95,600 less taxes compared to 2017. I think it's time for a drink!

 

[audreyh1]

2018 was my first year of retirement, and my taxes sure reflected that. My federal taxes decreased $73,200 compared to 2017, and my state taxes decreased $22,400. All in all, I paid $95,600 less taxes compared to 2017. I think it's time for a drink!

No kidding!!!

 

[FIREd]

For me it is impossible to compare my tax situation in 2017 and 2018 because of radically different income levels and a change in marital status.

 

[MarieIG]

2018 was my first year of retirement, and my taxes sure reflected that. My federal taxes decreased $73,200 compared to 2017, and my state taxes decreased $22,400. All in all, I paid $95,600 less taxes compared to 2017. I think it's time for a drink!

Congratulations!!! That has to feel awesome!!!

We too are looking forward to a large drop in taxes in our first year of retirement (2020).