New Tax Reform

[MonkeyMama]

• Retain the state and local tax deduction up to $10,000. The deduction disproportionately benefits high earners and taxpayers in Democratic states, though a number of Republican members of Congress representing high-tax states have opposed attempts to eliminate it, as the Big Six framework proposed.

Your post largely agrees with the (tax professional) update I received today, but one difference I had:

•Eliminate itemized deductions other than mortgage interest deductions, charitable contribution deductions, and property tax deductions of up to $10,000. All other state and local tax deductions are eliminated;

[kork13]

Your post largely agrees with the (tax professional) update I received today, but one difference I had:

•Eliminate itemized deductions other than mortgage interest deductions, charitable contribution deductions, and property tax deductions of up to $10,000. All other state and local tax deductions are eliminated;

Oops. I didn't QC the list too closely, mostly just copied it from the linked page. I caught another error from that page, which misstated the proposed standard deduction. I hate that it's so difficult to find accurate, unbiased information, even with (or perhaps because of) the plethora of information available on the internet. I wish the Ways & Means committee would have included all the numbers & more detail in those two summary documents... I really prefer to pull info from the source.

[kork13]

This is a quote from WSJ about the tax reform today.

"The House tax bill provides a 25% top tax rate for pass-through businesses such as partnerships and S corporations that pay taxes through their owners' individual tax returns. But it places limits on that rate that would prevent many businesses—especially in professional services—from getting that rate"

Ah, okay. I did see a note on one of those documents saying that they would restrict access to the pass-through rate from high earners. I expect that's probably one way they're working to reduce the cost of the cuts elsewhere... Screw the non-corporate high earners. Not necessarily agreeing or disagreeing with the stance, but it does carve out the goodness from a distinct section of society.

[LivingAlmostLarge]

I don't get why MFJ isn't the same as double the S/HOH. But that aside I'll be royally screwed either way. I am curious though if the business tax cuts will really benefit the lower income people versus just putting more into the pockets of the rich? Really they are going to raise the minimum wage then with these tax cuts? Give raises to everyone? I doubt it.

But either way I'll never see the child tax credit. I'll still itemize. But maybe without the AMT we might come out ahead. Worth considering.

[Singuy]

I don't get why MFJ isn't the same as double the S/HOH. But that aside I'll be royally screwed either way. I am curious though if the business tax cuts will really benefit the lower income people versus just putting more into the pockets of the rich? Really they are going to raise the minimum wage then with these tax cuts? Give raises to everyone? I doubt it.

But either way I'll never see the child tax credit. I'll still itemize. But maybe without the AMT we might come out ahead. Worth considering.

I would say for the medium income earners or even double that, this tax cut is something....

For a household with 2 kids/250k house with a mortgage rate at 4% and property tax at 4k making 80k of taxable income or so...

23% of the income are taxed at 10%
71% of the income are taxed at 15%
6% is taxed at 25%

Total tax is ~ 11560

With the new brackets, 100% of it are taxed at 12%

Total tax~9600

Child tax credit increased to 600 per child so that's additional $1200
Personal exemption lost on the child = $1620

Net loss of -420

Interest from mortgage is 10k, 4k in property tax. Itemized deduction this year plus exemption will yield 22100. New plan is 24000. Net gain of $475(25% bracket of 2017 used for net gain).

I'm not sure how state taxes work since I don't live in those states. But I'm assuming it's like ~5% off the 100k ordinary income which is 5k but then it's tax deductible vs federal income so that's another ~900 in net loss.

New plan:
1,960 +475 - 420 - 900 : ~$1115 gain vs current plan, $2,015 if you don't have state taxes.

So that's still something.

[clatoden99]

He claims “wages will go up” like we haven't seen.

Yet provides no logical framework for how cutting taxes on the upper brackets of the wealthy will magically make the wages go up.

I'm not amused.

[Nutria]

He claims “wages will go up” like we haven't seen.

Yet provides no logical framework for how cutting taxes on the upper brackets of the wealthy will magically make the wages go up.

I'm not amused.

Every politician claims their plan will add more jobs, and that everyone's wages will go up. The only plan that makes some people's wages go up is increasing the minimum wage.

[Sam1000]

First of all, it’s not a “plan.” A plan has details, measurable goals and a basic implementation strategy. He has a vague series of bullet points.

Those bullet points suggest big tax breaks for businesses and the wealthy, and some token chump change for the middle class. As has been the case with previous attempts to have tax breaks stimulate the economy, the changes will not “pay for themselves.” They will grow the deficit, so that the wealthy of today will be subsidized by the working class of tomorrow.

He claims that he will eliminate loop holes. I predict this will be a very selective process.

[terri77]

At least they're going to leave the 401k limits alone...for now. I will probably be paying more. There is little in the way of deductions for me as a single person. No kids, no student loans, I do have a mortgage but it's not much. As long as they leave the 401k limits alone, I don't have much to complain about.

[LivingAlmostLarge]

Actually how many small businesses are really worth $11m? You can gift $11m tax free and married $22m so do these people really need a tax cut to leave more than $22m to kids?

Further the pass through income (which is MOST small businesses) did they cut the tax to the corporation 20%? I agree it's unfair we are giving corporations a huge tax cut but then the finger to small businesses? So who are we really helping? Estate tax - really rich, 20% corporate cut - big corps? And pass throughs are still individual rates? Huh seems to me not small businesses.

And the taxing gradute student stipends? So I guess education now is for the rich period. Also eliminating student loan deduction and tuition deduction from page 1 1040 which mostly is taken by middle class people and you don't have to itemize to take is now going to be gone. How is education not being classified for those rich enough to do it?

[snafu]

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[Thrif-t]

Maybe I shouldn't comment, because I'm not really up on all this but I thought when the whole revising the tax code talk started the main objective was to simplify it and get rid of "ALL" write offs for the sake of simplicity?? At least that is how I understood it.

Seems like they've gotten some push back on some items and not able to get rid of them, thinking property taxes and mortgage deductions. I thought I would like the premise, make it easier. Not sure its turning out that way but thought that was the goal??

[Singuy]

The revised senate tax bill is actually extremely generous at least to someone like me.

-Child credit increased to 2k/child AND any couple making a taxable income of 500k/year or less qualifies? check

-Lower tax brackets across the board, check

-No more marriage tax penalty, check

-23% of our business income will be completely tax deductible (as long as the total taxable income is under 500k/year for married couple), check!

AMT will be adjusted, check!

yeah I'm looking at like a 20-25k tax break on a taxable income of about 320k/year..ridiculous

[disneysteve]

I'm looking at like a 20-25k tax break on a taxable income of about 320k/year..ridiculous

That's great for you, but it also illustrates the problem. It's a huge tax break for the rich despite the president insisting that it will help the middle class. It's actually going to devastate the middle class but I'm not the least bit surprised by that.

I haven't sat down and run the numbers to see how it could affect me. I won't do that until after something is actually passed and we know the final terms.

[corn18]

That's great for you, but it also illustrates the problem. It's a huge tax break for the rich despite the president insisting that it will help the middle class. It's actually going to devastate the middle class but I'm not the least bit surprised by that.

I haven't sat down and run the numbers to see how it could affect me. I won't do that until after something is actually passed and we know the final terms.

It's a wash for me:

NEW TAX LAW
2,018
Income 576,553
Std Ded (24,400)
Mortgage (14,000)
401k (24,000)
Taxable 514,153
Tax 91,479
35% over 400k 39,954
Medicare 2,639
EST NEW TAX 134,071
OLD TAX 134,327
256