Donald Trump & 2016 Election

[Dr. Blutarsky]

So did everyone figure out how much $$$ u get to keep from the gov?t in 2018? 

 

I went back to my last year's 1040 and adjusted the line items to reflect the changes in the new Trump tax plan. I estimate I'll be paying $4000 less in taxes a year under this tax plan.  And that is a big deal to me as I'm a small business that pays every year and that is a decent amount of money to me.  And I am in the the middle of the middle class.


 

[pilferk]

So did everyone figure out how much $$$ u get to keep from the gov?t in 2018? 
 

At the moment, I'm not able to calculate the exact amount but for me personally, it will be HUUUUUGGGEEEE!!! 

I am/have been what most people would consider to be genuinely middle-class.

My 'property taxes' are under the new $10K ceiling so I will be able to continue to deduct the entire amount.

My 'salary' now falls into a category that is something like 10% lower than in 2017 so my actual "take-home-pay" should increase by that percentage if I'm understanding how this all works.

My 'other income' will put my 'gross income' into a category that is now I believe something like 5%-ish lower than the 2017.

On top of those three categories, the personal deduction for everyone is almost double than it was in 2017!!!

From what I understand about the new system, I won't be able to use the new "postcard size form" because to take full advantage of charitable donations and/or medical expenses, I would still need to itemize.

But the major things are all WIN/WIN/WIN/WIN for me personally!!! 

Fyi: you cant itemize and take the standard deduction (which didnt really double).

So, those medical expenses go bye bye.

With the standard you get charity, mortgage, and child credits. Thats it.

No local taxes, no medical expenses. None of the (fewer) other write offs.

Job expenses, tuition expenses, and student loan interest apparently went bye bye, by the looks of things, if you take the standard deduction,too. I have to look a bit closer at things like property taxes on 2nd homes and refinancing costs, child care cost credits, as well as some other common write offs. But i think they will all require itemization to get.

Keep in mind, last year (aka the taxes you will be filing this year) you got a $6300 standard deduction....which you could only take if you didnt itemize. You also got a $4050 personal exemption...no matter what you did. If you took standard, you got 10,350 worth of credit. Now you get 12k....but only if you take the standard deduction with no real itemizing. The personal exemption is gone (for all family members). That $1650 "extra" doesnt wipe out a lot of what was lost from itemization changes....and for married with kids couples, the 24k + child tax credits doesnt fully cover all the exemptions, standard deductions, itemizations, and child tax credits that many families were using right now.

The lower rates help even that out, some, but you have a lot of middle class families it wont break even on...or will get them about $5 a week.

Comparing this year to next year. I'll be paying just over 1k more under the new plan. Middle class, homeowner, 3 kids. Be about $40 a paycheck...lor $20 a week. And that will come out of our entertainment budget, so the small businesses we frequent (brewery, theater, restaurants) will have to do without that from us.

I've talked to lots of folks who have "done the math" wrong (the standard deduction/personal exemption and loss of certain deductions, mostly) and as we talked through it, they had a light bulb go off.  I'll be back in February to check in and see what everyones actual check increase is. It will be interesting to see if they are what we think they are.

[GypsySoul]

Fyi: you cant itemize and take the standard deduction (which didnt really double).

So, those medical expenses go bye bye.

With the standard you get charity, mortgage, and child credits. Thats it.

No local taxes, no medical expenses. None of the (fewer) other write offs.

Job expenses, tuition expenses, and student loan interest apparently went bye bye, by the looks of things, if you take the standard deduction,too. I have to look a bit closer at things like property taxes on 2nd homes and refinancing costs, child care cost credits, as well as some other common write offs. But i think they will all require itemization to get.


I've talked to lots of folks who have "done the math" wrong (the standard deduction/personal exemption and loss of certain deductions, mostly) and as we talked through it, they had a light bulb go off.  I'll be back in February to check in and see what everyones actual check increase is. It will be interesting to see if they are what we think they are.

Luckily for me, medical expenses were, are and hopefully continue not to be a factor in deciding whether or not to itemize, as well as the job expenses/tuition/student loan interest deductions.  No second home or refinancing issues either.  (I guess I'm on the lower end of the middle-class scale but am truly blessed by not having significant debt-type expenses.)

I am also blessed with a very knowledgeable person who prepares my taxes that knows the questions to ask so I am able to provide them with all the information to take advantage of deductions that I would not have known I was even eligible.  As I stated before, I doubt I'll be using the postcard size form because it will be, as it always was, more advantageous for me to itemize. 

My job should send me an updated/corrected deduction printout under the new tax scale so I should know my take-home increase before actually receiving that February check.

Edited to add: If the stock market continues going up at this pace, I may need to find more things to deduct!!! 

Double Edit:

Fyi: you cant itemize and take the standard deduction (which didnt really double).

Using the new standard deduction will actually have a result ABOVE double because of your new starting point ..... being taxed at a lower rate on an income similar to that of 2017 and prior tax years! 

[sandman]

As in any tax year, if your writeoffs exceed the standard deduction, you itemize. Same as you always would. If they do not, then you are benefitting from a greater write-off via the standard deduction.

Beginning in 2018, you can actually write off more in medical expenses than in prior years.

However your paycheck changes will not show the whole story. The only way you will truly know the impact is if you prepare your 2017 taxes, and then prepare them again with the new rules (for comparison only).

Also, the child tax credit is going to have a major impact on families. Its $2,000. Its refundable! And it doesnt start to phase out until $400K for married couples. Big changes.

[WAR41]

Just wanted to jump in and say that when I looked at it I should be getting approximately $2,550 more than I would under the old plan.  Yes its entirely possible I did my calculations incorrectly, but I do think I'll be coming out on top which is great. 

[pilferk]

Using the new standard deduction will actually have a result ABOVE double because of your new starting point ..... being taxed at a lower rate on an income similar to that of 2017 and prior tax years! 

Not true, actually.

The lower rate helps, but, again, the loss of the personal exemption which you could use no matter which path (standard deduction or itemiztion) you took hurts.

Again, if you've always taken the standard deduction, instead of itemizing, you're lowering your taxable income by about $1650 vs "last year" (aka what you'll file sometime before April, 2018). No matter how you slice it, that's not "double".  Saying they "doubled" the standard deduction for singles and married is a bit misleading.  They actually 1) eliminated the marriage penalty 2)rolled in the standard deduction and the personal exemption to one "thing" 3) increased the total by about 10% for singles, and about 12% for married couples with no kids.  For anyone with at least one kid?  It's a tiny bit better than break even (for married/1 kid) or worse (if you have more than one kid).  For our family, if we'd taken the standard deduction last year with the personal exemptions, we'd have been at 32750....vs 24000 under the new plan. If I include the child tax credits, it's 35750 (current plan) vs 30000 (new plan).

The difference is, though, NOW you HAVE to take the standard deduction (and thus can not itemize, period) to get all of it. No personal exemption to form a basis of your itemization.  That means, if you itemize, you're starting in a hole (for us, $20,250 hole) in those itemization numbers. The 24k standard deduction is $3750 "more", but it doesn't offset (at least for us) all the deductions we lose by taking the standard. It's a catch 22. Under the new plan, we simply can't realize the amount of total deductions we've had in previous years.  So our taxable income will increase, and it JUST bumps that extra income into the next highest bracket (it's a relatively small amount, so we'll only pay the higher rate on that bit, but still).  The lower rates help, so we'll "only" see about a 1k annual increase in our tax due.

The math doesn't really lie on this one. Politicians do. Get your numbers, and do your math.  It's the only way to really know.  I'm doing the math based off what we have available, now, for information.  Maybe it's wrong or incomplete.  We'll see.....

[pilferk]

As in any tax year, if your writeoffs exceed the standard deduction, you itemize. Same as you always would. If they do not, then you are benefitting from a greater write-off via the standard deduction.

Sure, but they lowered the bar on itemization by removing the personal exemptions.  So 2017 vs 2018, your itemization number is already starting lower than it was.

So while what you're saying is essentially true, it's also not the WHOLE truth.

Because you are not necessarily "benefiting".  There are going to be a LOT of people who simply can't approach their level of deductions in 2018, that they had in 2017.  Maybe better to say you are "stuck with".

Beginning in 2018, you can actually write off more in medical expenses than in prior years.

But you basically need more of them to make claiming them sensible, since you have to itemize,....because to get to claim them, you have to overcome the loss of the personal exemption ,to make itemizing more worthwhile. This makes a "higher amount" a lot less relevant.  The higher ceiling is almost necessary in order to even leave the deduction on the itemization list.

What this means is: fewer people will actually claim them, in future years, than have....because they won't be able to surmount the standard deduction anymore.

Also, the child tax credit is going to have a major impact on families. Its $2,000. Its refundable! And it doesnt start to phase out until $400K for married couples. Big changes.

The math says otherwise.

You lost a $4050 personal exemption for each of those kids vs a 1000 increase in the credit.

With the new standard deduction rules, you are behind the eight ball if you have more than one kid.

For 2017, married, one kid:

Standard married deduction 12,500 + Personal exemptions 4050 x 3 + 1k child credit = 25650.

Under new plan, married, one kid: Standard married deduction = 24000 + 2k child tax credit = 26000

So, for one kid....$350 less in taxable income under the new plan.

For 2018, married, two kids:
Standard married deduction 12,500, Personal exemptions 4050 x 4 + 2k child credit = 30,700

Under new plan: Standard married deduction = 24000 +4k child tax credit = 28000

If you have 2 kids or more, you're paying taxes on $2700 more than you were under 2017 laws.

Again, the lower rates help, as does the higher phase out, but the loss of itemization means fewer deductions, too.

That 2k tax credit is a band aid, at best.....and it doesn't really make much of a difference at all.

One other thing to keep in mind: Lowering taxable income typically has the best long term results for tax payers.  Lower tax RATES tends to be temporary...and by increasing taxable income amounts...they've set up a situation where this could very quickly and easily be turned into a tax hike.  You often talk about not trusting the government? this plan makes it much easier for them to get more of your money, long term.

Also, I've not worked it out for single parent/head of household filers, but I think it might be a shade worse for them.

[sandman]

As in any tax year, if your writeoffs exceed the standard deduction, you itemize. Same as you always would. If they do not, then you are benefitting from a greater write-off via the standard deduction.

Sure, but they lowered the bar on itemization by removing the personal exemptions.  So 2017 vs 2018, your itemization number is already starting lower than it was.

So while what you're saying is essentially true, it's also not the WHOLE truth.

Because you are not necessarily "benefiting".  There are going to be a LOT of people who simply can't approach their level of deductions in 2018, that they had in 2017.  Maybe better to say you are "stuck with".

Beginning in 2018, you can actually write off more in medical expenses than in prior years.

But you basically need more of them to make claiming them sensible, since you have to itemize,....because to get to claim them, you have to overcome the loss of the personal exemption ,to make itemizing more worthwhile. This makes a "higher amount" a lot less relevant.  The higher ceiling is almost necessary in order to even leave the deduction on the itemization list.

What this means is: fewer people will actually claim them, in future years, than have....because they won't be able to surmount the standard deduction anymore.

Also, the child tax credit is going to have a major impact on families. Its $2,000. Its refundable! And it doesnt start to phase out until $400K for married couples. Big changes.

The math says otherwise.

You lost a $4050 personal exemption for each of those kids vs a 1000 increase in the credit.

With the new standard deduction rules, you are behind the eight ball if you have more than one kid.

For 2017, married, one kid:

Standard married deduction 12,500 + Personal exemptions 4050 x 3 + 1k child credit = 25650.

Under new plan, married, one kid: Standard married deduction = 24000 + 2k child tax credit = 26000

So, for one kid....$350 less in taxable income under the new plan.

For 2018, married, two kids:
Standard married deduction 12,500, Personal exemptions 4050 x 4 + 2k child credit = 30,700

Under new plan: Standard married deduction = 24000 +4k child tax credit = 28000

If you have 2 kids or more, you're paying taxes on $2700 more than you were under 2017 laws.

Again, the lower rates help, as does the higher phase out, but the loss of itemization means fewer deductions, too.

That 2k tax credit is a band aid, at best.....and it doesn't really make much of a difference at all.

One other thing to keep in mind: Lowering taxable income typically has the best long term results for tax payers.  Lower tax RATES tends to be temporary...and by increasing taxable income amounts...they've set up a situation where this could very quickly and easily be turned into a tax hike.  You often talk about not trusting the government? this plan makes it much easier for them to get more of your money, long term.

Also, I've not worked it out for single parent/head of household filers, but I think it might be a shade worse for them.

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

here's where your confusion lies....the child tax credit is NOT A WRITE-OFF. it is straight cash. it is a direct subtraction from your overall tax liability. (comparing this to write-offs, it is the equivalent of about a $13,400 write-off at an effective tax rate of 15%.  so keep that number in mind when comparing it to the exemptions/write-offs going away.)

so using the same example you listed above, let's assume a salary of $130,000/married/2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $101,300. Your tax liability would be $16,803 MINUS $1,000 = $15,803.
(The MINUS $1,000 is for the child tax credit. it is $1,000 per child but begins phasing out at $110,000. So in this example, they would get a credit of $2,000 minus $50 for every thousand above $110,000 (or 20). So the full child tax credits would amount to $1,000)

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $106,000. Your tax liability would be....$15,199 (if my math is correct) MINUS $4,000 = $11,199.
(The MINUS $4,000 is for the new child tax credit. it is $2,000 per child and does not phase out until $400,000).

Benefit under new tax plan: $15,803 - $11,199 = $4,604 SAVINGS
   

[pilferk]

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

I understand how they work just fine.  I did fubar the credit/write off by trying to explain too quickly. Fair enough and my apologies.  But it also doesn't work out quite as neatly as you demonstrate...unless of course you use a VERY convenient example for income (and a very specific one).

I've run this years numbers through 3 different 2018 calculators (from reputable places like forbes and turbotax) based on the new laws.  Looking at the detail, I'm pretty sure they're doing it right.   Our tax liability will be somewhere between 1009 and 1082 more for 2018....unless our property taxes skyrocket or I decide to just give some extra money to charity to reduce it a little (probably will do this).

here's where your confusion lies....the child tax credit is NOT A WRITE-OFF. it is straight cash. it is a direct subtraction from your overall tax liability. (comparing this to write-offs, it is the equivalent of about a $13,400 write-off at an effective tax rate of 15%.  so keep that number in mind when comparing it to the exemptions/write-offs going away.)

No confusion, I promise. Just a brain fart.

The number you are using is misleading (equivalent to 13k). The effective equivalent varies widely by income level.  You're also using the 2k number in your math, which just isn't correct.  "We" have a 1k credit already, per child.  The only way your effective comparison actually matters is if you were in the phase out range in 2017, and you were losing part of your credit. I don't know how many folks that would effect, but the median married filing jointly income suggests not the majority.

The average annual income of married filing jointly in 2016 was 107,795.  I think thats a fair number to use (and also doesn't phase out ANY of the child tax credit...interesting, no?...that your number does).  I'll do that example at the end.

And yes, 1400 of the 2k per kid is refundable.  But not all of it.

so using the same example you listed above, let's assume a salary of $130,000/married/2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $101,300. Your tax liability would be $16,803 MINUS $1,000 = $15,803.
(The MINUS $1,000 is for the child tax credit. it is $1,000 per child but begins phasing out at $110,000. So in this example, they would get a credit of $2,000 minus $50 for every thousand above $110,000 (or 20). So the full child tax credits would amount to $1,000)

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $106,000. Your tax liability would be....$15,199 (if my math is correct) MINUS $4,000 = $11,199.
(The MINUS $4,000 is for the new child tax credit. it is $2,000 per child and does not phase out until $400,000).

Benefit under new tax plan: $15,803 - $11,199 = $4,604 SAVINGS   

First off, not 4604 in savings.  Only $1400 of the credit is refundable, so you only realize that 4604 in savings IF you have offsetting remaining tax liability.  It would be more correct to say between $4604 AND $3404 in savings. Yes, I know they have tax liability to offset, so functionally it's $4604, but not every situation is going to be quite that equivalent

And notice...as I said..you're paying taxes on an additional 5k in income?  Now, imagine without itemization (due to loss of personal exemptions), that number is more like 20k to 25k, mostly at the 25% effective rate?

That extra 5k to 6k in tax liability wipes out that 4604-3604 (which isn't what most people are going to see, anyway) in savings, quick.  Like I said before: Band aid.

Now, lets use a less contrived (130k is EXACTLY where you'd see half phase out of the child tax credit you'd "earned'....it's not like you pulled that number out of the air) number to figure things out.

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000....EXCEPT $1200 ($600 of each credit) of the child tax credit, in this case, is not refundable. So that 1k  better have a tax liability offset, to be sure it gets put to the fullest use , or it might just set you to 0 (rather than get you a refund), and you basically break even. Thats the best case scenario (that you have tax liablity to offset).  The language on the credit, as I'm reading it, is wonky.  I can't tell if it's the "first 1400" that's refundable or if it's the "last 1400".  But either way, you're skating close to the sun with that 1k.

But, again, in the examples, they are paying taxes right from the standard deduction, on roughly 4k more dollars.  And MANY families/homeowners could potentially have lost up to 23k in write offs because of the loss of the personal exemptions in the calculation not getting you over the 24k hump, so it would make sense to itemize. We are a prime example of this: You take the personal exemptions away and just our normal itemization...and we are under 24k. So we are left with the standard deduction and the loss of roughly 16k in write offs we can't use.  And that 24k standard deduction + mortgage interest + property taxes + charity doesn't get us to this years (2017 taxes) write off levels. We are WELL short.  And the increased child tax credit doesn't wipe enough out to "fix" that. 1k is left on the table. And from talking to folks, we are not unique.

Which is fine. We can hack it. It's like $20 a week...and we're in a position that doesn't really matter much.  We'll just spend less at the local businesses we frequent for entertainment and stay at home a bit more.  No biggie.

But you asked the question with the expectation that everyone was going to come in and crow about how great this bill is.  It's a minor break for a lot of people (between 1% and 2% of income, based on independent projections), a slight increase for others (like us), and a HUGE break for the 1% and corporations (though, the one bonus: Small businesses get a decent break too).

All that being said,  it's taxing more of your income.  It might be taking LESS, because of the slightly lower rates, but it has effectively raised the AMOUNT of income that's getting taxed for many, many people.

Which is a PERFECT set up, down the line, for a nice, easy ,tax hike...and all they have to do is keep the current rules, and return the rates to "normal" in 10 years (or less, if the Dems retake Congress).  They can even do it without saying they "raised" taxes.

All while the deficit spirals out of control.  Oh joy.

OK, back in a few weeks to check everyone's withholdings! Too much school stuff to do the next couple of weeks.

[tim_m]

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

I understand how they work just fine.  I did fubar the credit/write off by trying to explain too quickly. Fair enough and my apologies.  But it also doesn't work out quite as neatly as you demonstrate...unless of course you use a VERY convenient example for income (and a very specific one).

I've run this years numbers through 3 different 2018 calculators (from reputable places like forbes and turbotax) based on the new laws.  Looking at the detail, I'm pretty sure they're doing it right.   Our tax liability will be somewhere between 1009 and 1082 more for 2018....unless our property taxes skyrocket or I decide to just give some extra money to charity to reduce it a little (probably will do this).

here's where your confusion lies....the child tax credit is NOT A WRITE-OFF. it is straight cash. it is a direct subtraction from your overall tax liability. (comparing this to write-offs, it is the equivalent of about a $13,400 write-off at an effective tax rate of 15%.  so keep that number in mind when comparing it to the exemptions/write-offs going away.)

No confusion, I promise. Just a brain fart.

The number you are using is misleading (equivalent to 13k). The effective equivalent varies widely by income level.  You're also using the 2k number in your math, which just isn't correct.  "We" have a 1k credit already, per child.  The only way your effective comparison actually matters is if you were in the phase out range in 2017, and you were losing part of your credit. I don't know how many folks that would effect, but the median married filing jointly income suggests not the majority.

The average annual income of married filing jointly in 2016 was 107,795.  I think thats a fair number to use (and also doesn't phase out ANY of the child tax credit...interesting, no?...that your number does).  I'll do that example at the end.

And yes, 1400 of the 2k per kid is refundable.  But not all of it.

so using the same example you listed above, let's assume a salary of $130,000/married/2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $101,300. Your tax liability would be $16,803 MINUS $1,000 = $15,803.
(The MINUS $1,000 is for the child tax credit. it is $1,000 per child but begins phasing out at $110,000. So in this example, they would get a credit of $2,000 minus $50 for every thousand above $110,000 (or 20). So the full child tax credits would amount to $1,000)

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $106,000. Your tax liability would be....$15,199 (if my math is correct) MINUS $4,000 = $11,199.
(The MINUS $4,000 is for the new child tax credit. it is $2,000 per child and does not phase out until $400,000).

Benefit under new tax plan: $15,803 - $11,199 = $4,604 SAVINGS   

First off, not 4604 in savings.  Only $1400 of the credit is refundable, so you only realize that 4604 in savings IF you have offsetting remaining tax liability.  It would be more correct to say between $4604 AND $3404 in savings.

And notice...as I said..you're paying taxes on an additional 5k in income?  Now, imagine without itemization (due to loss of personal exemptions), that number is more like 20k to 25k, mostly at the 25% effective rate?

That extra 5k to 6k in tax liability wipes out that 4604-3604 (which isn't what most people are going to see, anyway) in savings, quick.  Like I said before: Band aid.

Now, lets use a less contrived (130k is EXACTLY where you'd see half phase out of the child tax credit you'd "earned'....it's not like you pulled that number out of the air) number to figure things out.

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000....EXCEPT $1200 ($600 of each credit) of the child tax credit, in this case, is not refundable. So that 1k (it's less than $1200) better have a tax liability offset , or it sets you to 0, and you basically break even. Thats the best case scenario (that you have tax liablity to offset).

But, again, in the examples, they are paying taxes right from the standard deduction, on roughly 4k more dollars.  And MANY families/homeowners could potentially have lost up to 23k in write offs because of the loss of the personal exemptions in the calculation not getting you over the 24k hump so you could itemize. We are a prime example of this: You take the personal exemptions away and just our normal itemization...and we are under 24k. So we are left with the standard deduction.  But that + mortgage interest + property taxes + charity doesn't get us to this years write off levels.We are WELL short.  And the increased child tax credit doesn't wipe enough out to "fix" that. 1k is left on the table. And from talking to folks, we are not unique.

Which is fine. We can hack it. It's like $20 a week...and we're in a position that doesn't really matter much.  We'll just spend less at the local businesses we frequent for entertainment and stay at home a bit more.  No biggie.

But you asked the question with the expectation that everyone was going to come in and crow about how great this bill is.  It's a minor break for a lot of people (between 1% and 2% of income, based on independent projections), a slight increase for others (like us), and a HUGE break for the 1% and corporations.

And it's taxing more of your income.  It might be taking LESS, in terms of rates, but it has effectively raised the AMOUNT of income that's getting taxed for many, many people.

Which is a PERFECT set up, down the line, for a nice, easy ,tax hike...and all they have to do is keep the current rules, and return the rates to "normal" in 10 years (or less, if the Dems retake Congress).  They can even do it without saying they "raised" taxes.

All while the deficit spirals out of control.  Oh joy.

OK, back in a few weeks to check everyone's withholdings! Too much school stuff to do the next couple of weeks.

And how long before people having less to spend puts the economy in the shitter/

[pilferk]

And how long before people having less to spend puts the economy in the shitter/

See, I don't think it's that bad (unless perception wrecks Consumer Confidence). It's just not that good, either.  At least not for the wage earners. Businesses fair better, for sure. But to parade this around like it's the second coming, or that it's some sort of savior of the middle class....that's political grandstanding for the rah rah ditto heads. I would hesitate to even call it a modest tax break for most of the middle class....who are likely now paying taxes on MORE of their income with LESS write offs available. Anecdotally, in our neck of the woods (small, suburban, firmly pegged middle class, in CT) it's a win some/lose some balancing act.  Some are seeing a 1 to 2k break, and a pretty equal number are seeing a 1 to 2k increase. Mes a mes.

What I think it is...for the lower and middle wage earners (aka the W2 sect), is basically a zero sum game, maybe slightly better (+1%, maybe?).  But the paltry amount it's "better" isn't enough to stimulate the economy, or support the "we'll grow out of the deficits with this tax cut, don't worry" mentality.

Businesses don't grow, or add jobs, just because they have extra cash. Hell, corporate america is sitting on the largest stockpile of cash in history. The only thing they're doing is going on mergers and acquisition sprees (I'm looking at you, disney), increasing dividends (slightly), or doing buybacks.  Surveyed CEOs (despite some notable PR opportunities that you may have seen) say they'll likely do more of the same with the tax breaks. Maybe they're lying....but the one thing I find dependable in this world is corporate greed, so....

And all that ignores the fact that the past 2 Republican presidents and Congresses have tried the same sorts of things, using the same sorts of logic.  And both have put us in Recessions (and yes, I'm aware that 9-11 had something to do with the Bush Jr. Recession...but so did trickle down).  I'm not sure why the Repubs think this time is any different...but we'll see.

OK, seriously, I gotta get back to school work for the next few weeks.

Enjoy the debate, everyone.

[sandman]

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

I understand how they work just fine.  I did fubar the credit/write off by trying to explain too quickly. Fair enough and my apologies.  But it also doesn't work out quite as neatly as you demonstrate...unless of course you use a VERY convenient example for income (and a very specific one).

I've run this years numbers through 3 different 2018 calculators (from reputable places like forbes and turbotax) based on the new laws.  Looking at the detail, I'm pretty sure they're doing it right.   Our tax liability will be somewhere between 1009 and 1082 more for 2018....unless our property taxes skyrocket or I decide to just give some extra money to charity to reduce it a little (probably will do this).

you do not fully understand how tax credits work, and you are posting inaccurate information, so I am going to break things out into separate posts to help avoid further confusion.

first off, there is nothing online that will fully calculate your 2018 tax liability. what you completed on Forbes and Turbo Tax are estimates only. Still, based on the info provided, I am fairly certain you will be in the average range of coming out 1% to 2% ahead.

[sandman]

Now, lets use a less contrived (130k is EXACTLY where you'd see half phase out of the child tax credit you'd "earned'....it's not like you pulled that number out of the air) number to figure things out.

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000....EXCEPT $1200 ($600 of each credit) of the child tax credit, in this case, is not refundable. So that 1k  better have a tax liability offset, to be sure it gets put to the fullest use , or it might just set you to 0 (rather than get you a refund), and you basically break even. Thats the best case scenario (that you have tax liablity to offset).  The language on the credit, as I'm reading it, is wonky.  I can't tell if it's the "first 1400" that's refundable or if it's the "last 1400".  But either way, you're skating close to the sun with that 1k.

"Refundable" only comes into play if you do not have any tax liability. about 45% of Americans pay no Federal Income Tax ("FIT"). For those families/individuals that pay $0 in FIT, they can now collect $1,400 per child. so the government actually sends them free money. in the past, this tax credit was only partially refundable via the related but separate "Additional Tax Credit".
in your example, the tax liability is $12,256.25, so clearly the FULL $4,000 is credited. 

but then you say "in this case", $1,200 "is not refundable". that is not true. you also note that it "might just set you to 0, rather than get you a refund".  again, not true. if a family with one child has a tax liability below $2,000, they will collect money from the government. Their tax liability becomes negative.

[pilferk]

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

I understand how they work just fine.  I did fubar the credit/write off by trying to explain too quickly. Fair enough and my apologies.  But it also doesn't work out quite as neatly as you demonstrate...unless of course you use a VERY convenient example for income (and a very specific one).

I've run this years numbers through 3 different 2018 calculators (from reputable places like forbes and turbotax) based on the new laws.  Looking at the detail, I'm pretty sure they're doing it right.   Our tax liability will be somewhere between 1009 and 1082 more for 2018....unless our property taxes skyrocket or I decide to just give some extra money to charity to reduce it a little (probably will do this).

you do not fully understand how tax credits work, and you are posting inaccurate information, so I am going to break things out into separate posts to help avoid further confusion.

first off, there is nothing online that will fully calculate your 2018 tax liability. what you completed on Forbes and Turbo Tax are estimates only. Still, based on the info provided, I am fairly certain you will be in the average range of coming out 1% to 2% ahead.

I do understand it. And I'm not posting inaccurate information.  Badly phrased, but not inaccurate.

And I'm fairly sure, given I do my taxes and you don't, that I won't.

No matter how BADLY you want it to be or insist otherwise.

The estimators have been fairly accurate in years past...I've no reason to think otherwise, now.  And I CERTAINLY know what my 2017 liability is/was.  Not to mention...the 2018 estimator is pretty easy to work out, given the loss of personal exemptions.  The only thing that will slightly change is my mortgage interest deduction will go down a tad and my property taxes will go up a tad....and my income should (assuming stability at work) go up 2.75%.  Those amounts are the only thing that will change my liability (my charitable contributions are pretty static).  The other write offs I use have either been eliminated (job expenses and a couple others), or won't rise to the level (tuition expenses, medical expenses, student loan interest, 2nd home property taxes, etc), on their own, to supplant the standard deduction.  My write offs in 2018 will be significantly less than they were/will be in 2017. Period. And the lower rates and increased child tax credit don't wipe that out.  That's what I keep telling you...but you seem to be unable (unwilling?) to understand.    Doesn't make it less true, though.

I have tried and true estimators that have proven to work for me in the past vs...partisan assurances to the contrary.

Wow, does THAT sound familiar! Math vs politics.

[pilferk]

Now, lets use a less contrived (130k is EXACTLY where you'd see half phase out of the child tax credit you'd "earned'....it's not like you pulled that number out of the air) number to figure things out.

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000....EXCEPT $1200 ($600 of each credit) of the child tax credit, in this case, is not refundable. So that 1k  better have a tax liability offset, to be sure it gets put to the fullest use , or it might just set you to 0 (rather than get you a refund), and you basically break even. Thats the best case scenario (that you have tax liablity to offset).  The language on the credit, as I'm reading it, is wonky.  I can't tell if it's the "first 1400" that's refundable or if it's the "last 1400".  But either way, you're skating close to the sun with that 1k.

"Refundable" only comes into play if you do not have any tax liability. about 45% of Americans pay no Federal Income Tax ("FIT"). For those families/individuals that pay $0 in FIT, they can now collect $1,400 per child. so the government actually sends them free money. in the past, this tax credit was only partially refundable via the related but separate "Additional Tax Credit".
in your example, the tax liability is $12,256.25, so clearly the FULL $4,000 is credited. 

but then you say "in this case", $1,200 "is not refundable". that is not true. you also note that it "might just set you to 0, rather than get you a refund".  again, not true. if a family with one child has a tax liability below $2,000, they will collect money from the government. Their tax liability becomes negative.

And my actual MATH shows the FULL 4k is credited in the figuring. No?

You're saying precisely what I was trying to say, but I phrased it badly.  You can see that if you read the REST of the sentences (context) afterwards. I apologize for being unclear. "There are situations where the tax credit may not result in a refund, or at least a full refund, of the full value of the credit".  Clearer?  It was meant as the proviso that the WHOLE credit is not refundable.  Only part of it.

And the language on the refundability (go head, find and read it) is still wonky.  It's not framed (or phrased) like other tax credits are.  I don't know why, but its not.

To correct: It's not "if you don't have any tax liability". It's "If you have less than the total credit value in tax liability".  There's more than a semantic difference.  The example at the end is right, the statement at the beginning is not.

[sandman]

Now, lets use a less contrived (130k is EXACTLY where you'd see half phase out of the child tax credit you'd "earned'....it's not like you pulled that number out of the air) number to figure things out.

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000....EXCEPT $1200 ($600 of each credit) of the child tax credit, in this case, is not refundable. So that 1k  better have a tax liability offset, to be sure it gets put to the fullest use , or it might just set you to 0 (rather than get you a refund), and you basically break even. Thats the best case scenario (that you have tax liablity to offset).  The language on the credit, as I'm reading it, is wonky.  I can't tell if it's the "first 1400" that's refundable or if it's the "last 1400".  But either way, you're skating close to the sun with that 1k.

"Refundable" only comes into play if you do not have any tax liability. about 45% of Americans pay no Federal Income Tax ("FIT"). For those families/individuals that pay $0 in FIT, they can now collect $1,400 per child. so the government actually sends them free money. in the past, this tax credit was only partially refundable via the related but separate "Additional Tax Credit".
in your example, the tax liability is $12,256.25, so clearly the FULL $4,000 is credited. 

but then you say "in this case", $1,200 "is not refundable". that is not true. you also note that it "might just set you to 0, rather than get you a refund".  again, not true. if a family with one child has a tax liability below $2,000, they will collect money from the government. Their tax liability becomes negative.

And my actual MATH shows the FULL 4k is credited in the figuring. No?

You're saying precisely what I was trying to say, but I phrased it badly.  You can see that if you read the REST of the sentences (context) afterwards. I apologize for being unclear. "There are situations where the tax credit may not result in a refund, or at least a full refund, of the full value of the credit".  Clearer?  It was meant as the proviso that the WHOLE credit is not refundable.  Only part of it.

And the language on the refundability (go head, find and read it) is still wonky.  It's not framed (or phrased) like other tax credits are.  I don't know why, but its not.

To correct: It's not "if you don't have any tax liability". It's "If you have less than the total credit value in tax liability".  There's more than a semantic difference.  The example at the end is right, the statement at the beginning is not.

your math is correct, but the paragraph I bolded above is so far off the mark. i'll assume you understand but you sure as hell can't tell after reading that.

your last statement I underlined above is essentially saying the same thing. the refundability only comes into play once your tax liability is at $0. that may happen after you apply a portion of the child tax credit. For example, if your tax liability is $1,500 before the child tax credit, you apply $1,500 of the $2,000 credit and it gets you to $0 tax liability. At that point, refundability comes into play and you get the other $500 as well. BEFORE that point, it doesn't matter. so both of those statements underlined are true.

[sandman]

you don't fully understand how taxes work. but that's good news for you! you should come out ahead (in a better position) in 2018.

I understand how they work just fine.  I did fubar the credit/write off by trying to explain too quickly. Fair enough and my apologies.  But it also doesn't work out quite as neatly as you demonstrate...unless of course you use a VERY convenient example for income (and a very specific one).

I've run this years numbers through 3 different 2018 calculators (from reputable places like forbes and turbotax) based on the new laws.  Looking at the detail, I'm pretty sure they're doing it right.   Our tax liability will be somewhere between 1009 and 1082 more for 2018....unless our property taxes skyrocket or I decide to just give some extra money to charity to reduce it a little (probably will do this).

you do not fully understand how tax credits work, and you are posting inaccurate information, so I am going to break things out into separate posts to help avoid further confusion.

first off, there is nothing online that will fully calculate your 2018 tax liability. what you completed on Forbes and Turbo Tax are estimates only. Still, based on the info provided, I am fairly certain you will be in the average range of coming out 1% to 2% ahead.

I do understand it. And I'm not posting inaccurate information.  Badly phrased, but not inaccurate.

And I'm fairly sure, given I do my taxes and you don't, that I won't.

No matter how BADLY you want it to be or insist otherwise.

The estimators have been fairly accurate in years past...I've no reason to think otherwise, now.  And I CERTAINLY know what my 2017 liability is/was.  Not to mention...the 2018 estimator is pretty easy to work out, given the loss of personal exemptions.  The only thing that will slightly change is my mortgage interest deduction will go down a tad and my property taxes will go up a tad....and my income should (assuming stability at work) go up 2.75%.  Those amounts are the only thing that will change my liability (my charitable contributions are pretty static).  The other write offs I use have either been eliminated (job expenses and a couple others), or won't rise to the level (tuition expenses, medical expenses, student loan interest, 2nd home property taxes, etc), on their own, to supplant the standard deduction.  My write offs in 2018 will be significantly less than they were/will be in 2017. Period. And the lower rates and increased child tax credit don't wipe that out.  That's what I keep telling you...but you seem to be unable (unwilling?) to understand.    Doesn't make it less true, though.

I have tried and true estimators that have proven to work for me in the past vs...partisan assurances to the contrary.

Wow, does THAT sound familiar! Math vs politics.

i'm not a big fan of this tax plan. it's not really what I wanted. things I hate about it:
1. it did not simplify things as much as I had hoped.
2. it also helps the rich more on a percentage basis.
3. it reduces incentives to own a home.

I really don't care if the tax plan helps you or not. the facts are the facts. it will help far more than it hurts, but it would not be at all surprising if someone on this board was in the minority of people it hurts.

but based on all the information you provided about yourself, and the fact that you had a "brain fart" and explained tax credits incorrectly, I was thinking that maybe you were missing the boat on the value of A) the increased child tax credit;  and B) the impact of the new tax brackets.  which I think is understandable given your initial explanation of how tax credits work was WAY off the mark.   

based on info you have shared, for the 2017 tax year, you will reduce your taxable income by about $40,000 via the personal exemptions ($20,250) and itemizing (approx. $20K in write-offs via SALT, mortgage interest, charity). and it sounds like your AGI is about $100,000. So your taxable income is about $60,000 and you owe about $8,071 in taxes minus the $3,000 in child tax credits for a total tax liability of $5,071.

in 2018, you will lose the exemptions ($0), and increase your write-offs from roughly $20K to exactly $24K, resulting in your taxable income increasing to $76,000 (compared to $60,000 in 2017). Based on the new rates, you will owe $8,599 in taxes minus the $6,000 in child tax credits for a total tax liability of $2,599.

That would be $2,472 less in taxes, or a 2.5% benefit to you (i.e. a 2.5% decrease in taxes owed to Uncle Sam). 

I know you have not provided all of your information, but in this example, it would be a major benefit. the lower rates alone almost make up the difference of writing off less. 

[sandman]

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000

where did you get the $12,256.25 from?

I believe that should be $10,313, which would bring the tax liability down to $6,313.

If I am correct, that would be a tax savings of nearly $3,000.

families who have kids and were taking the standard deduction are the ones that will benefit the most from this tax plan. and the more kids the better.

[pilferk]

Income is 107,795, married, 2 kids:

2017 tax year: standard deduction ($12,500); personal exemptions ($16,200) = $28,700 in write offs. So you pay taxes on $79,095. Your tax liability would be $11,251.25 MINUS $2,000 = $9,251.25.

2018 tax year: standard deduction ($24,000); personal exemptions ($0) = $24,000 in write offs. So you pay taxes on $83,795. Your tax liability would be $12,256.25 MINUS $4,000 = $8,256.25

So yes, better, by about $1000

where did you get the $12,256.25 from?

I believe that should be $10,313, which would bring the tax liability down to $6,313.

If I am correct, that would be a tax savings of nearly $3,000.

families who have kids and were taking the standard deduction are the ones that will benefit the most from this tax plan. and the more kids the better.

From the published 2018 rates on forbes? But looking at them now, they're not correct.

I think they're the old rates or a misprint (I just shot them an email).  They're still using the 25% at the 3rd tax level in the table they have.


Edit: They just fixed it:

https://www.forbes.com/sites/kellyphillipserb/2017/12/17/what-the-2018-tax-brackets-standard-deduction-amounts-and-more-look-like-under-tax-reform/#1ada5c291401



Their old table was exactly this one (grabbed for posterity):
 

Only the married filing jointly was pointed to the old/bad image....figures.

Edit Edit: They just sent me a nice thank you email and a code for a free annual subscription. Nice!

[pilferk]

i'm not a big fan of this tax plan. it's not really what I wanted. things I hate about it:
1. it did not simplify things as much as I had hoped.
2. it also helps the rich more on a percentage basis.
3. it reduces incentives to own a home.

Ditto.  Combined with "they didn't actually find a way to pay for them".

I really don't care if the tax plan helps you or not. the facts are the facts. it will help far more than it hurts, but it would not be at all surprising if someone on this board was in the minority of people it hurts.

I don't think it's that small of a minority. Maybe.  Maybe we all live in the same small town in CT (with high property values and taxes)? [Edit: That's not meant to point out a contributing factor.  Just a comment on the type of town we live in.]

based on info you have shared, for the 2017 tax year, you will reduce your taxable income by about $40,000 via the personal exemptions ($20,250) and itemizing (approx. $20K in write-offs via SALT, mortgage interest, charity).

I'm not comfortable sharing specifics (for obvious reasons) but your assumed numbers are far enough off, in these first two paragraphs, to make the rest of the example (as it pertains to me) not much matter. You got the household size and makeup right (so, consequently, the personal exemption number, too)...and that's about it.

The loss of personal exemptions, and the elimination of some of the write offs we took altogether (job expenses, for example) leave us on the outside.  And the elimination of those write offs put us at an "itemization level" where the standard deduction is the better option (but not by much). It's just not AS GOOD of an option as we have THIS year.

Which, again, is totally fine.  We can hack it. I'm not at all complaining. But it is what it is.  Without the lower rates and increased child tax credit.....we'd be looking at more like a 5k-6k increase.  So..there's that!

Based on the new rates, you will owe $8,599 in taxes minus the $6,000 in child tax credits for a total tax liability of $2,599.

    O man, do I wish.