Final Final Tax Plan

[corn18]

But there's no way to be sure because we don't know what the final rules will actually be. If you saved $4,500, that's great, but you won't actually know until after the bill passes.

Maybe I'll shoot my accountant an email (he's a friend our ours) and see if there's anything he's advising clients to do in anticipation of the most likely changes.

Well, if the bill doesn't pass, I haven't lost $4500. I just took care of something in 2017 and got credit for it in 2017 that I would normally do in 2018. Impact:

I do nothing and bill doesn't pass - $0
I do nothing and bill passes - I miss out on $4500 lower taxes this year

I do something and bill doesn't pass - $0
I do something and bill does pass - +$4,500 of saved taxes this year

If the bill doesn't pass, it's a wash for me.

[disneysteve]

Well, if the bill doesn't pass, I haven't lost $4500. I just took care of something in 2017 and got credit for it in 2017 that I would normally do in 2018.

For sure. You only have something to gain, nothing to lose.

[disneysteve]

Maybe I'll shoot my accountant an email (he's a friend our ours) and see if there's anything he's advising clients to do in anticipation of the most likely changes.

I had an unofficial exchange with my accountant with the disclaimer that nothing represented actual tax advice since the bill hasn't been finalized and passed yet.

His exact words were, "There's a good chance you’re gonna get screwed into higher taxes." Of course, that was pretty much my expectation since we aren't among the wealthy that this tax cut is aimed at. He said he ran his own taxes with the proposed changes and he will pay almost $3,000/year more, but he's not wealthy either.

This is pretty much what I've been saying all along.

[frugal saver]

I'm on the lower end of middle class ($52k) and I'll come out ahead. Now every year I'm saving every receipt trying to get my itemized deductions higher than the standard--the new standard will be wonderful.

Note: For those that follow the above-given link to the bill:

The first part (500 pages) is changes (i.e. "for paragraph 3(c) change $2,000 to $3,000)--not always helpful.

Go to page 501 for the table of contents for the Senate/House conference agreement. Then when you go to each section of interest, it gives Current Law, Senate Bill, House Bill, Conference Agreement and is very readable.

[Singuy]

I had an unofficial exchange with my accountant with the disclaimer that nothing represented actual tax advice since the bill hasn't been finalized and passed yet.

His exact words were, "There's a good chance you’re gonna get screwed into higher taxes." Of course, that was pretty much my expectation since we aren't among the wealthy that this tax cut is aimed at. He said he ran his own taxes with the proposed changes and he will pay almost $3,000/year more, but he's not wealthy either.

This is pretty much what I've been saying all along.

Hmm, I wonder how you are going to get screwed into higher taxes. All the brackets have been shifted lower. The only time when you do get screwed is probably Tom with a super high income and needs to pay a stupid amount of state taxes(like 50k in his case). He can only deduct 10k out of the 50k which even with the lower bracket he may not even come out ahead.

But if you make I think 200k/year or less, you should come out ahead or break even in States with state taxes. Now if you have a spouse that works, then this tax plan saves you a boatload. We used to pay about a 6-7k in marriage tax penalty, now we don't.

[disneysteve]

Hmm, I wonder how you are going to get screwed into higher taxes.

He didn’t go into a lot of detail but specifically mentioned SALT, the state and local tax deduction. NJ is one of the states where that will have a major impact.

[Singuy]

He didn’t go into a lot of detail but specifically mentioned SALT, the state and local tax deduction. NJ is one of the states where that will have a major impact.

Perhaps your tax guy didn't see that 10k of SALT is now tax deductible.

[LivingAlmostLarge]

$10k in SALT is nothing. That's barely property taxes in NJ let alone state income taxes for many in Northeast.

I'm looking at probably paying more because of the AMT. interestingly we might qualify finally for the child tax credit but I'm not sure. So $4k maybe. I'd drop from the 33% bracket to 32%?

As for us we're looking now at quickly buying a car this year to capture the sales tax on the large purchase and finish itemizing as much as possible with the $10k cap.

Most people I know might break even because even now with AMT, PEP, PEASE, etc they are paying through their eye teeth and this really isn't a break unless you are self-employed, make money from investments, or ridiculously wealthy.

High wage earners aren't getting the break.

[disneysteve]

Just to show a tax professional's impression, this was posted online this morning by a local CPA:

This is the first time in the almost 105 year history of our tax code that employees will pay higher rates than the self-employed. It’s also the first time that corporations will pay a rate far lower maximum rate than citizens will pay.
1. Some politicians promised tax reform is about YOU. It’s not.
• Virtually every politician pushing the tax bill stressed its primary purpose would be to deliver tax relief to all Americans, especially those in middle class. That’s logical, since we’re the ones they’re supposed to be representing.
• Here’s President Donald Trump from a speech on Dec. 13: “We want to give you, the American people, a giant tax cut for Christmas. And when I say giant, I mean giant. … It’s a massive tax cut for the middle class.”
• Its not!! Corporate tax rates, on the other hand, WILL be cut nearly in half, from today’s maximum of 35 percent to a new maximum of only 21 percent
• According to Bloomberg, the actual tax relief for individuals earning between $40,000 and $100,000 will be between $15 and $23 a week..
• The new law also contains a provision allowing corporations with profits stashed overseas to bring them back to the U.S. and pay as little as 8 percent in taxes instead of the current maximum rate of 35%.

2. Some politicians promised they care about our nation’s debt. They don’t.
• This bill cuts taxes without corresponding cuts in government spending. Estimates are that it will add up to $1.5 trillion to our $20 trillion national debt over the next 10 years.

[Singuy]

Ahem to that.

Taking out the ability to deduct SALT is ridiculous. I don't feel the pain and actually benefit from the new tax plan due to the state I live in. But for the majority of the people in the U.S, this tax cut is probably near a wash once you start making above 150k/year as a household.

They didn't take out any corporate loopholes which means the effective tax rate today for corporations being at 18.7% will drop down to something non-existence after the new bill is passed.

Cutting corporate taxes may bring certain companies from overseas back to the U.S, but it is not a job creating tool if the companies are already in the U.S. Having high corporate taxes create incentive to never take a profit(which creates growth since you are reinvesting into your company). Not saying that CEOs are not making money...they are making a boatload because the reinvestment are converted into value in stocks...which then you can sell for only a 20% capital gains tax. Now CEOs will just pass down the profits via loopholes to themselves and shareholders via dividends and stock buyback.

This tax cut is a gigantic gift for the ultra wealth. All that free gift for the top 0.01% and yet there was a fight when certain senators find certain individuals shouldn't get tax cuts as a small business owner. I'm not complaining about the final result, but I just find it funny how universally they all agreed the billionaires need a tax break, but there was a fight between the house and senate when it comes to small businesses.

[MonkeyMama]

In addition to what Steve copy and pasted, the one thing I'd add is that any talk of "tax simplicity" is a total joke.

I guess that and the one thing that bothered me the most is how fast they rammed it through. The whole thing will be rife with loopholes and unintended tax consequences. Time will tell what those will be.

As to AMT, the best I can say is that it's like healthcare. It's been a nightmare of a problem for decades. I think they really thought that no one tried to get rid of AMT before, and that it would be a simple fix. They may be willing to run up huge deficits, but they weren't willing to raise taxes at all to offset the loss of AMT. In the end, AMT is a middle class tax. I think the complication of it (additional deficit if they dropped it) is more to the point, but I also think they just didn't really care. (Though I suppose that could end up being an unintended consequence. I don't get the sense they did any thorough analysis of how AMT would interact with the new tax plan).

[Singuy]

In addition to what Steve copy and pasted, the one thing I'd add is that any talk of "tax simplicity" is a total joke.

I guess that and the one thing that bothered me the most is how fast they rammed it through. The whole thing will be rife with loopholes and unintended tax consequences. Time will tell what those will be.

As to AMT, the best I can say is that it's like healthcare. It's been a nightmare of a problem for decades. I think they really thought that no one tried to get rid of AMT before, and that it would be a simple fix. They may be willing to run up huge deficits, but they weren't willing to raise taxes at all to offset the loss of AMT. In the end, AMT is a middle class tax. I think the complication of it (additional deficit if they dropped it) is more to the point, but I also think they just didn't really care. (Though I suppose that could end up being an unintended consequence. I don't get the sense they did any thorough analysis of how AMT would interact with the new tax plan).

They got rid of AMT for corporations but not for the general population. Corporations can deduct away but we are still stuck with the alternate min tax. They did raise it 100k from 80k.

[disneysteve]

The problem with the AMT is when it was first created, nobody thought to index it for inflation, a mistake the government has made before, like when IRAs were created. They never seem to learn that making absolutes sets things up for problems down the line.

As for them ramming this bill through, that's no surprise at all. That's how they've done everything since January. They bring things up and push the vote as quickly as possible and try to avoid anyone (i.e. Democrats) having a chance to actually read the bill or question anything.

It will be interesting to see what happens after the 2018 election. The Republicans only have a 2-seat majority and I think there's a pretty solid chance they will lose that. I think we will see a significant change in how things go if the Democrats regain control of Congress. Unfortunately, we need to survive another year of this mess first.

[Singuy]

I wonder if this tax bill will drive an influx of people into tax free states. Also I wonder if it'll increase renters and decrease house buyers since most people's property tax+interest wouldn't surpass the new standard deduction.

I really hope they thought this thing through. May cause a housing market crash in HCOLA since their houses are way overpriced to begin with. These are also the states with state and local income taxes.

[disneysteve]

I really hope they thought this thing through.

I guarantee nothing was thought through. I'm also sure that any official report, such as from the CBO or similar, that critiqued the plan was summarily ignored.