Poll

Did the GOP tax plan help or hurt you?

Helped a lot.
Helped a little.
Didn't help or hurt.
Hurt a little.
Hurt a lot.

Author Topic: Did the GOP tax plan help or hurt you?  (Read 12641 times)

BTDretire

  • Handlebar Stache
  • *****
  • Posts: 2491
Re: Did the GOP tax plan help or hurt you?
« Reply #150 on: April 06, 2019, 10:05:43 AM »
Finally filed for 2018. I think overall it helped a little, but last year was an anomaly for me in many ways so it's hard to compare apples to apples.

Spent almost half of 2018 without a job (most of which was on purpose), so the lower earnings meant the increase to a $12k standard deduction took a huge chunk off what I might have owed. Paid some of that savings back via the Shared Responsibility Payment since I elected to not carry insurance for ~2 months (this was a LOT less than I thought it would be - this penalty turns out to not have the sting that I was worried it would).

Suspect that I would have seen a much larger refund, except that I also sold some stock lots to come up with cash, GF and I bought a house last year. Capital gains to declare and be taxed on.

Was really unsure how the changes would play out for my situation, but in the end I got a Federal refund and owed the State money as usual (MA living up to its reputation!).

I feel like this "standard deduction" increase was one of the biggest scams in selling the plan. There isn't that big of a difference between the old standard deduction + personal exemption and the new standard deduction without a personal exemption.

Personal Exemption was $4400 IIRC? Standard deduction doubling to $12k means an additional $1600 deduction, which given the reduced income I had last year, represented a larger-than-usual percentage of income for the year. I suppose I could have clarified and said "huge marginal chunk" ;-).

I agree that the marketing of this scheme made this sound like a much bigger tax break than it actually was for many people. It definitely helped a bit on aggregate, though.

I believe the personal exemption was up to $4050 (visible on the 2017 1040 form, row 42). Your final result is correct (an individual filing Single gained ($12000-($6350+$4050)) = $1600 in deductions) because of another error: the standard deduction in 2017 was $6350, not $6000.

I agree that for an individual filing Single, the loss of the personal exemption was largely a wash. Filings with dependent children, however, lost $4050 in deductions. The child tax credit changed to compensate for this loss. I believe that filings with dependents who are not children (think elderly parent) simply lost this deduction with no corresponding gain (I could very well be wrong here).

I believe that there was a dependent credit that was for dependents who are not children.  Was worth $500, maybe?
You are correct, a new $500 credit for dependents who are not children was introduced for 2018. Thanks for pointing that out! (I found it in the 1040 instructions on page 6 (What's New)).

(I do want to mention that I was confused by your tense use. I wasn't sure if you were saying that there used to be a dependent credit or if there is one now. It's still 2018 tax season after all!)

I got a little relief with the QBI, and saver credit is something new I think.
That Credit took $400 off my tax bill. Plus the lower rates, helped my tax bill.
 (snip)

Not sure if this saver's credit is what you mean, but if so, it is not new.
You are correct, I looked back on old forms it's there, I just never noticed it.

Arbitrage

  • Bristles
  • ***
  • Posts: 414
Re: Did the GOP tax plan help or hurt you?
« Reply #151 on: April 08, 2019, 11:30:23 AM »
Great question! I'll ask my husband, he mentioned something about "bunching" and it not working out for us. I think we don't give enough? We only donate about 5k a year.

Some people (usually rich people) attempt to "bunch" all of their deductions into a single year, and then claim the standard deduction the rest of the time.

For example, if you're MFJ then your standard deduction is $24k in any given year and if you only have $10k of itemized deductions (charitable contributions, etc) then in any given year you're charitable donations aren't tax deductible anymore because they don't exceed the standard deduction you're going to get anyway.  But you can donate the exact same total amount if you give $30k to charity this year and then zero for the next two years, while claiming the $30k deduction this year and then the $24k standard deduction the next two years.  Over the course of the three year cycle, you would pay less taxes by giving 3x as much 1/3 as often than you would pay if you gave the same amount every year.

The newly increased standard deduction was designed to be slightly above the average amount that middle class families itemize, to force them into the ("simplified") standard deduction.  So you'd think that millions of middle class families would benefit from this bunching strategy, but the problem is that most of those itemized deductions aren't charitable donations that can be easily moved from one year to the next.  For most of us, a big chunk of our itemized deductions are mortgage interest and property taxes, and most jurisdictions explicitly prohibit you from deferring or prepaying those to move them into a different tax year.

Wealthy families with more than $24k in itemized deductions can still itemize every year, but they only receive benefit for the amount of their deductions that exceed 24k, instead of the amounts over 12k like it was before.  So a family that makes 150k and itemizes 25k per year now gets 1k of benefit instead of 13k of benefit, which is not nothing but it's not nearly as good as it was before.  At the same ratios a family that makes 1.5million and itemizes 250k per year now gets 226k of benefit instead of 238k of benefit.  So in terms of overall effective tax rates, the newly increased standard deductions means very little to super rich people, but is a dramatic cut to families with more moderate incomes.

I attempted to bunch deductions in 2017 in anticipation of the new $10k SALT limit, within the extent allowed - paid spring property tax bill early (bill comes in fall of the previous year, but I typically don't pay until close to the due date, which is the next year); paid some estimated state tax so that I wouldn't owe extra in April as I typically do.  Unfortunately, I just ended up triggering AMT, so it didn't benefit me. 

Under the new tax law, we're now barely over the standard deduction cap, so bunching deductions may become a viable strategy for us in the future as our mortgage draws down and/or the deduction cap goes up. 

Evgenia

  • Stubble
  • **
  • Posts: 149
  • Location: California
    • Evgenia Got FI
Re: Did the GOP tax plan help or hurt you?
« Reply #152 on: April 08, 2019, 03:53:36 PM »
Total tax liability increased by $15k, with nothing else changed between tax years (same income, deductions, etc.).

nvmama

  • 5 O'Clock Shadow
  • *
  • Posts: 94
  • Age: 41
  • Location: MA
Re: Did the GOP tax plan help or hurt you?
« Reply #153 on: April 11, 2019, 06:25:08 AM »
It hurt us. We did make a bit more, but the elimination of the personal exceptions really hurt and the extra for childern didn't really help at all. Last year we got a significant return, no changes really this year but we did put more into our 401k, hoping to off set a bit of our income increase. This year we owed.  Went from 15% tax bracket to 22%.
What I find intresting (others might not)...typically we do worse off in our state taxes (MA), always getting much less back in comparison to the fed return.  This year for state, we still got back less than last year...as we had slighly more income, but it didn't change nearly as significant as the federal one.

nvmama

  • 5 O'Clock Shadow
  • *
  • Posts: 94
  • Age: 41
  • Location: MA
Re: Did the GOP tax plan help or hurt you?
« Reply #154 on: April 12, 2019, 04:40:34 AM »
It hurt us. We did make a bit more, but the elimination of the personal exceptions really hurt and the extra for childern didn't really help at all. Last year we got a significant return, no changes really this year but we did put more into our 401k, hoping to off set a bit of our income increase. This year we owed.  Went from 15% tax bracket to 22%.
What I find intresting (others might not)...typically we do worse off in our state taxes (MA), always getting much less back in comparison to the fed return.  This year for state, we still got back less than last year...as we had slighly more income, but it didn't change nearly as significant as the federal one.

v8rx7guy

  • Handlebar Stache
  • *****
  • Posts: 1243
  • Location: Bellingham, WA
Re: Did the GOP tax plan help or hurt you?
« Reply #155 on: April 12, 2019, 08:12:34 AM »
It hurt us. We did make a bit more, but the elimination of the personal exceptions really hurt and the extra for childern didn't really help at all. Last year we got a significant return, no changes really this year but we did put more into our 401k, hoping to off set a bit of our income increase. This year we owed.  Went from 15% tax bracket to 22%.
What I find intresting (others might not)...typically we do worse off in our state taxes (MA), always getting much less back in comparison to the fed return.  This year for state, we still got back less than last year...as we had slighly more income, but it didn't change nearly as significant as the federal one.

Ah  yes, the classic, "let's compare refunds" to determine if the new tax plan helped or hurt.  That's not to say you're not right, but it's an unfair comparison between the years.  What was your tax owed both years?

NorCal

  • Pencil Stache
  • ****
  • Posts: 685
Re: Did the GOP tax plan help or hurt you?
« Reply #156 on: April 12, 2019, 08:28:25 AM »
I just changed my vote after reviewing my taxes.  I'll say the plan helped a lot, although my life situation changed enough that 2018 isn't truly comparable with prior years.  I had previously expected the law to be about a wash.  My federal effective tax rate was about 4 percentage points lower than last year, which added up to thousands of dollars. Life events that impacted our tax calculations:

1. We had somewhat lower income in 2018 than 2017, reducing the hit from our highest brackets.
2. We moved from California to Colorado mid year.  This didn't impact our federal taxes much (if at all), but our state taxes are dramatically lower.
3.  My wife changed jobs mid year.  I took time off from work to help with the move.  I generated some self-employment income as a consultant post move, then found a full time job.  Our income situation was atypical.

I've actually become a pretty big fan of the new tax law.  The overall structure is simpler, and I don't have the CA SALT deduction making me do AMT calculations every year.  Getting rid of the AMT (for my personal tax situation) is a HUGE win.

Omy

  • Stubble
  • **
  • Posts: 195
Re: Did the GOP tax plan help or hurt you?
« Reply #157 on: April 13, 2019, 03:08:49 PM »
Revising my answer after actually doing our taxes: we made $50k more in 2018 than in 2017...but paid almost $4000 less in federal taxes this year. The QBI deduction, lack of AMT, and lower tax rate overcame the loss of SALT deductions. We are relatively high earners in a HCOL area who don't need this "win", though.

effigy98

  • Bristles
  • ***
  • Posts: 323
Re: Did the GOP tax plan help or hurt you?
« Reply #158 on: April 13, 2019, 04:44:29 PM »
Just did taxes, the lowest tax bill I have ever had. Having a side business helped a lot this year. 300k+ total comp this year and 4% less total taxes.

Fomerly known as something

  • Pencil Stache
  • ****
  • Posts: 729
  • Location: Midwest
Re: Did the GOP tax plan help or hurt you?
« Reply #159 on: April 14, 2019, 08:16:43 AM »
Just finished running the numbers.  I paid about 3% more more to the federal government this year.  I compared 2016 and 2018 as I sold investment properties in each year, total taxable income for those years was withing $1000.

freya

  • Bristles
  • ***
  • Posts: 271
Re: Did the GOP tax plan help or hurt you?
« Reply #160 on: April 14, 2019, 08:38:34 AM »
Hurt.

I'm the perfect storm for getting killed by this tax plan:  high tax location (NYC) and all W2 income.

The one bit of silver lining is that I still get to itemize due to being single.  The $12K exemption means that you only have to come up with $2K in charitable donations and mortgage interest to get extra deductions.

Meanwhile, people are indeed moving out of high tax locales like New York.  The exodus was already happening before the tax plan came to be, but it's sped things up.  I hope enough taxpayers stick around to pay for all the people who are benefiting from heavy state & local spending, who of course have no incentive to leave.  If I didn't have elderly family in the area who depend on me, and if I could find the things I like best about living in NYC (walkable/friendly neighborhood, incredibly rich culture) elsewhere, I woudn't hesitate to move.

BlueHouse

  • Magnum Stache
  • ******
  • Posts: 2958
  • Location: WDC
Re: Did the GOP tax plan help or hurt you?
« Reply #161 on: April 15, 2019, 10:08:38 AM »

I'm the perfect storm for getting killed by this tax plan:  high tax location (NYC) and all W2 income.


I wish more people understood this.  People who work for a living pay more tax than those who have income from other sources (savings, investments, dividends, etc).   If that's not a rigged system, I don't know what is.

JGS1980

  • Stubble
  • **
  • Posts: 100
Re: Did the GOP tax plan help or hurt you?
« Reply #162 on: April 15, 2019, 10:33:04 AM »

I'm the perfect storm for getting killed by this tax plan:  high tax location (NYC) and all W2 income.


I wish more people understood this.  People who work for a living pay more tax than those who have income from other sources (savings, investments, dividends, etc).   If that's not a rigged system, I don't know what is.

I agree with Blue. I'd also like to add that I have NO IDEA why a real estate professional or a pizza shop owner gets to be taxed less than a teacher, a lawyer, or a doctor. Why the 20%? It's not like lawyers or doctors don't get to run their own "small business".

StarBright

  • Handlebar Stache
  • *****
  • Posts: 1273
Re: Did the GOP tax plan help or hurt you?
« Reply #163 on: April 15, 2019, 10:45:22 AM »
I'm very interested in who got hurt vs helped. I wonder if people wouldn't mind posting their approximate income and family situation?

I know a lot of lower income families with kids who seemed okay, and it looks like households who made over 200k did okay? We are directly in the middle (of those two groups, not 50% percentile). Not in the top 10% of income earners (closer to top 30% percentile), but certainly lucky enough to be solidly middle class.

I felt a little surgically targeted :) Live in the HCOL area in a MCOL state, remote work for a company based in a HCOL state which charges penalties, and DH is in a field where unreimbursed job expenses are a huge outlay. And we are all W2 income as well.

If this year is the best we are getting going forward we are going to have to look seriously at how to structure ourselves for taxes. I'm not even sure if it is possible to tax advantage without one of us changing jobs.

That being said - I think taxes are valuable and good and I am happy to pay my local taxes at their nutty-high rates because I get a ton of value. I also don't mind federal taxes in general, but I am feeling leaned on as a tax payer. And I think paying double taxes (on both remote work, and taxes on my taxes because of the capped SALT) is extremely problematic.

« Last Edit: April 15, 2019, 01:14:05 PM by StarBright »

Cranky

  • Handlebar Stache
  • *****
  • Posts: 1665
Re: Did the GOP tax plan help or hurt you?
« Reply #164 on: April 15, 2019, 01:10:24 PM »
We benefited from the tax changes, whilst disapproving of them. LOL

Upper end of middle income, nothing to itemize, no kids left to deduct. Our federal taxes were around $2k lower this year.

Proud Foot

  • Handlebar Stache
  • *****
  • Posts: 1010
Re: Did the GOP tax plan help or hurt you?
« Reply #165 on: April 15, 2019, 02:11:22 PM »
We ended up better from the changes. A big jump in AGI from prior year due to my spouse starting a full time job late in 2017. I used our 2018 information and calculated based upon the 2017 calculations. Our Taxable income was 4k higher using the new law but total tax was 4k less. This cam from ending up in a lower marginal tax bracked and the difference in the child tax credit.

cloudsail

  • Bristles
  • ***
  • Posts: 433
Re: Did the GOP tax plan help or hurt you?
« Reply #166 on: April 15, 2019, 04:05:16 PM »
I really wish people would stop comparing the sizes of their refund or tax bill. Even if you didn't change your W4, your employer adjusted for the new tax bill and has been deducting your paycheck differently. You need to look at total taxes paid over your AGI and compare with last year. For example, we owed approximately the same amount this year as last year, but we had less taxes deducted from our paycheck every month. In the end, our effective tax rate this year was 20.5% vs. 24.3% last year.

iris lily

  • Magnum Stache
  • ******
  • Posts: 3189
Re: Did the GOP tax plan help or hurt you?
« Reply #167 on: April 15, 2019, 07:52:19 PM »
It hurt me. My country is once again operating at a deficit.
I like this answer.

My actual tax bill was obscenely low, plus we got free health insurance premiums. Rah rah being low income in america. We live on our high assets.

freya

  • Bristles
  • ***
  • Posts: 271
Re: Did the GOP tax plan help or hurt you?
« Reply #168 on: April 16, 2019, 06:56:55 AM »
I felt a little surgically targeted :) Live in the HCOL area in a MCOL state, remote work for a company based in a HCOL state which charges penalties, and DH is in a field where unreimbursed job expenses are a huge outlay. And we are all W2 income as well.

Have you considered asking to be switched from employee to contractor status?  That would be especially important for DH, because he would get to deduct those unreimbursed expenses - on top of getting the 20% pass-through deduction, plus you could claim home office deduction.  Also, if you are paid via 1099 rather than W2, you would pay taxes to your MCOL state rather than the HCOL state.  Also also, you can probably get yourself a much better retirement plan by opening solo 401Ks - you can make the maximum contribution plus 20% of your net income, have full control over the plan, and avoid fees.

You'd have to spreadsheet it after you get info on how much you'd be paid as a contractor, if the employers are willing to do it.  The compensation would have to be salary + fringe, not just salary, in order for this to make sense.  Fringe is usually in the 26-33% range.

If this were even a remote possibility at my job, I wouldn't have hesitated to make the jump.