Potential federal tax change.

[frayne]

Getting rid of Schedule A entirely would be a good move.

Yes, yes, and yes, it would make the tax system fairer and more of a level playing field. You could still do a safe harbor set amount for charity based on taxable income.

 

[Gumby]

Thanks, Gumby for this information and the example.

You're welcome, street.

Frankly, it is irrelevant to me whether they should do this or who mostly benefits or whether there is a better way. I just like to know what is coming down the road so I can plan ahead. I like to know by December how much in taxes I will pay in the year to come, and, barring last minute or retroactive changes in the law, I usually do. I thought others might like to plan ahead as well, which is why I posted this news.

 

[pb4uski]

While I oppose the bill, it will allow me to do $4,400 more in tax-free Roth conversions annually so I guess I should be in favor of it, but the $96 billion increase in the deficit that it would cause is distasteful to me.

It is just unnecessary... taxes are relatively low by historical standards and don't need to be lowered further.

 

[dknighd]

I mostly quit thinking about proposed legislation. It is only proposed, and likely will end up being a pawn in some future negotiation. If it comes up to a vote, then passes, I'll think more seriously about how it effects me.
On the surface this would be good for me. I currently use the standard deduction. And Roth convert up to the top of the current 12% bracket. So this would let me convert $4k more each year without going from 12% to 22%. A potential savings of $400 each year. Not life changing, but not to be ignored.

 

[JoeWras]

You're welcome, street.

Frankly, it is irrelevant to me whether they should do this or who mostly benefits or whether there is a better way. I just like to know what is coming down the road so I can plan ahead. I like to know by December how much in taxes I will pay in the year to come, and, barring last minute or retroactive changes in the law, I usually do. I thought others might like to plan ahead as well, which is why I posted this news.

Yeah, thanks Gumby. Next year is my once-every-three-years charitable donation to the DAF. If this change occurs, it will be a factor. Having a head's up is good. There's a chance we'll instead sneak it into this year.

I see others' point about it being regressive at the lowest incomes who pay no tax. That's true as long as one assumes this is inflationary. Economic theorists still argue about that kind of thing.

 

[scrabbler1]

I am in the 10% marginal tax bracket, so an increase in the SD of $4k would reduce my tax bill by........$400. Hardly earth-shattering, and it wouldn't simplify my tax return. I do the tax returns for 3 other people, and they all take the SD, except, once in a while, my 92-year-old dad when he has had large medical bills; even then, he exceeded the SD by a small amount.

As long as they don't offset the SD increase with something else, like the elimination of the personal exemption when they passed the TCJA back in 2017, I will do a little better than barely breaking even like with the TCJA.

 

[Aerides]

I mostly quit thinking about proposed legislation. It is only proposed, and likely will end up being a pawn in some future negotiation. If it comes up to a vote, then passes, I'll think more seriously about how it effects me.

This is one of the primary reasons that we only discuss proposed legislation on er.org after it clears committee. For every 100 proposals, a handful or less get this far. True, it may change significantly before passing, or dying on a vine somewhere!

 

[JoeWras]

This is one of the primary reasons that we only discuss proposed legislation on er.org after it clears committee. For every 100 proposals, a handful or less get this far. True, it may change significantly before passing, or dying on a vine somewhere!

There's another board that won't allow discussion until Presidential signing. I think that is too limiting. I appreciate knowing about this.

 

[sparky08]

“Only”. From google and USA Today: “In the tax year 2020, 87.3% of Americans took the standard deduction, just shy of the 87.6% who did in 2019, IRS data shows.”

Wow, I would have never guessed it would be that high.

This will be the first year I take the standard deduction in probably 35 years.

 

[pb4uski]

Wow, I would have never guessed it would be that high.

This will be the first year I take the standard deduction in probably 35 years.

I do 7 tax returns. Since TCJA all are standard deduction. Not even close.

 

[COcheesehead]

If it passes, I may load charity contributions into ‘23 and itemize one last time. After that the bar is set too high for us to itemize unless medical expenses go nuts.

 

[JoeWras]

If it passes, I may load charity contributions into ‘23 and itemize one last time. After that the bar is set too high for us to itemize unless medical expenses go nuts.

Ditto.

I really hope we have clarity on this by November. Then again, maybe we'll just load charitable into this year regardless. I wouldn't be surprised to see a retroactive action in early 2024 so that all politicians could claim a victory for their re-election.

 

[ivinsfan]

Why bother? The benefit for a MFJ couple with $80k of ordinary income the tax benefit is $580... big deal.

With the significant federal deficits that we have and large national debt this is the last thing that we should be doing... just a waste of time to try to curry favor with voters but a proverbial nit in the whole scheme of things.

Well it begins in 24...remember what happens in 24....I'll wait. I'm with Pb4...

 

[braumeister]

Well it begins in 24...remember what happens in 24.

Oh, right -- it's a leap year. Gotta tweak the spending plan.

 

[Chuckanut]

What services do you think they want to cut to pay for it? Hopefully we do not need whatever they are.

They will cut no services. They will send the bill to our children and grandchildren.

 

[Chuckanut]

The only people I know who aren’t taking the standard deduction fall into two catagories:

1. They are extremely wealthy.

2. They bought their first house in my very housing cost area and thus are are paying outrageous amounts of interest on an outrageously large mortgage.

 

[Born2Fish]

You're welcome, street.

Frankly, it is irrelevant to me whether they should do this or who mostly benefits or whether there is a better way. I just like to know what is coming down the road so I can plan ahead. I like to know by December how much in taxes I will pay in the year to come, and, barring last minute or retroactive changes in the law, I usually do. I thought others might like to plan ahead as well, which is why I posted this news.

And you are correct!!

 

[COcheesehead]

The only people I know who aren’t taking the standard deduction fall into two catagories:

1. They are extremely wealthy.

2. They bought their first house in my very housing cost area and thus are are paying outrageous amounts of interest on an outrageously large mortgage.

You might be surprised. It doesn’t take much when you add some mortgage interest, property tax, state taxes paid, some donations, maybe some medical. I’ve itemized for several years now and I don’t think I fall into 1 or 2.

 

[TheWizard]

You might be surprised. It doesn’t take much when you add some mortgage interest, property tax, state taxes paid, some donations, maybe some medical. I’ve itemized for several years now and I don’t think I fall into 1 or 2.

With the current limit on deductibility of SALT, that no longer works for me, and I have no mortgage interest nor excess medical...

 

[cathy63]

The only people I know who aren’t taking the standard deduction fall into two catagories:

1. They are extremely wealthy.

2. They bought their first house in my very housing cost area and thus are are paying outrageous amounts of interest on an outrageously large mortgage.

You might be surprised. It doesn’t take much when you add some mortgage interest, property tax, state taxes paid, some donations, maybe some medical. I’ve itemized for several years now and I don’t think I fall into 1 or 2.

Around here most single people with a mortgage can itemize. SALT is capped at $10K no matter your filing status, so a single person with a good job only needs another $3850 in mortgage interest and charitable contributions to get over the bar. I do a lot of returns where I itemize for people in that situation. Some of those are borderline and would use the standard deduction if it goes up by $2K though.

The other group that itemizes a lot is older people with pensions and high medical expenses.

 

[Koolau]

The only people I know who aren’t taking the standard deduction fall into two catagories:

1. They are extremely wealthy.

2. They bought their first house in my very housing cost area and thus are are paying outrageous amounts of interest on an outrageously large mortgage.

Sorry, not guilty on either "charge."

Wealthy by "average" standards, but certainly not by the standards of this bunch!

Haven't had a mortgage for 13 years.

Since I got my first "real" j*b, we have itemized. YMMV

 

[target2019]

Math is hard!

Is impossibly difficult.

 

[DrRoy]

Haven't itemized since a few years before RE.

 

[Montecfo]

You might be surprised. It doesn’t take much when you add some mortgage interest, property tax, state taxes paid, some donations, maybe some medical. I’ve itemized for several years now and I don’t think I fall into 1 or 2.

You are right. I have itemized just about every year as long as I can remember. But big driver is charity so with DAF I can bunch donations more easily. Thus will have more standard deduction years mixed in.

 

[scrabbler1]

I itemized on my federal return until I ERed in 2008. For a few early years in ER, I didn't itemize if my HI costs were low, before and after the ACA. Even then, I wasn't clearing the SD amount by much. The SD went up to $12k with the TCJA, so I didn't have to itemize any more.

I did some "bunching" of estimated 4Q state income taxes which saved me some taxes one or two years. It's nice not having to work through those calculations any more.

With state income taxes, I stopped itemizing for a while when I paid off the mortgage in 1998. Without state income taxes and with a higher SD amount, it became a lot tougher to exceed the SD; only once or twice did I itemize there, and not by much.