Tax thresholds to be wary of

[CCCA]

Hi I did a quick search but may have missed any previous discussion of this.  I'm in the process of selling some individual stocks and want to safely avoid any significant jumps that the new tax law may hold so I thought I'd solicit feedback / input about non-linear thresholds that may occur in the tax law.  Last year for the first time, we exceeded the threshold for getting any sort of child tax credit and it made a significant difference in our average tax rate and total tax bill. 


- I looked it up and the child tax credit is now $2000/child instead of $1000 and the AGI where it starts to phase out is now $400,000 instead of $110,000 in 2017.  So we're now easily safe from that. 


- in helping my mother do her taxes, I note that there's a tax cliff related to social security income and needing to watch out since if you pass a certain threshold a larger chunk of your SS income becomes taxable and your tax can jump up in a very non-linear fashion (with very high effective marginal tax rates). 


Are there any others that I would need to be aware of.  We are right around the low $100,000s in AGI so I don't need to know about thresholds that are in the $200k+ range, though for completeness sake, you are welcome to add them.  I can edit this post (like a wiki) if it would be helpful.

[terran]

The 0% long term capital gains rate tops out at $77,200 taxable income.

[MDM]

You could put your situation in the case study spreadsheet and see the marginal rates for various amounts of LTCGs.

It doesn't have the entire federal tax code, but may have all the quirks that apply to your situation.

[CCCA]

The 0% long term capital gains rate tops out at $77,200 taxable income.

I'm aware of that one, but I want to make sure I understand it.  It's like the normal tax brackets in that only the LTCG income above that amount is taxed at 15% but the remainder below that amount is still taxed at 0%.   It's not as if suddenly all your LT capital gains are now taxed at 15%.  Is that correct?
[/size]

You could put your situation in the case study spreadsheet and see the marginal rates for various amounts of LTCGs.

It doesn't have the entire federal tax code, but may have all the quirks that apply to your situation.

[/size]
Wow, that looks awesome.  Here I was trying to cobble together a spreadsheet to estimate my taxes.  I'll dig through this and see if I can figure out how my taxes change as a function of my stock sales. 


thanks for the tip!

[secondcor521]

Here's my list.  It sounds like you might be a family of 3; if so and you live in the lower 48 then this list should apply directly to you.  If you have more than one child, then the numbers obviously change:

Single / family of 3 (new tax bill)

$200,000   Child tax credit phaseout starts $50 per $1000
$90,000   American opportunity tax credit phaseout ends
$82,500   Top of 22% bracket
$81,680   ACA tax credit maximum (family of 3) (400% FPL 2018)
$80,000   American opportunity tax credit phaseout starts
$80,000   Student loan interest deduction phaseout ends
$80,000   Tuition and fees deduction phaseout ends
$66,000   Lifetime learning credit phaseout ends
$65,000   Student loan interest deduction phaseout starts
$65,000   Tuition and fees deduction phaseout starts
$56,000   Lifetime learning credit phaseout starts
$51,050   CSR 73 ACA cost sharing reduction (family of 3) (250% FPL 2018)
$49,999   Simplified EFC calculation qualification (plus other criteria)
$45,007   Earned income tax credit
$40,840   CSR 87 ACA cost sharing reduction (family of 3) (200% FPL 2018)
$38,700   Top of 12% bracket
$38,600   Top of 0% capital gains rate
$31,000   Retirement savings credit
$30,630   CSR 94 ACA cost sharing reduction (family of 3) (150% FPL 2018)
$25,000   Automatic zero EFC for college (as of 2018/2019 FAFSA year; need to update)
$9,525   Top of 10% bracket

HTH.

[MDM]

Here's my list.  It sounds like you might be a family of 3; if so and you live in the lower 48 then this list should apply directly to you.  If you have more than one child, then the numbers obviously change:

Single / family of 3 (new tax bill)

$200,000   Child tax credit phaseout starts $50 per $1000
$90,000   American opportunity tax credit phaseout ends
$82,500   Top of 22% bracket
$81,680   ACA tax credit maximum (family of 3) (400% FPL 2018)
$80,000   American opportunity tax credit phaseout starts
$80,000   Student loan interest deduction phaseout ends
$80,000   Tuition and fees deduction phaseout ends
$66,000   Lifetime learning credit phaseout ends
$65,000   Student loan interest deduction phaseout starts
$65,000   Tuition and fees deduction phaseout starts
$56,000   Lifetime learning credit phaseout starts
$51,050   CSR 73 ACA cost sharing reduction (family of 3) (250% FPL 2018)
$49,999   Simplified EFC calculation qualification (plus other criteria)
$45,007   Earned income tax credit
$40,840   CSR 87 ACA cost sharing reduction (family of 3) (200% FPL 2018)
$38,700   Top of 12% bracket
$38,600   Top of 0% capital gains rate
$31,000   Retirement savings credit
$30,630   CSR 94 ACA cost sharing reduction (family of 3) (150% FPL 2018)
$25,000   Automatic zero EFC for college (as of 2018/2019 FAFSA year; need to update)
$9,525   Top of 10% bracket

HTH.

Great list!

I believe the spreadsheet includes all except the crossed-out items.

[terran]

The 0% long term capital gains rate tops out at $77,200 taxable income.

I'm aware of that one, but I want to make sure I understand it.  It's like the normal tax brackets in that only the LTCG income above that amount is taxed at 15% but the remainder below that amount is still taxed at 0%.   It's not as if suddenly all your LT capital gains are now taxed at 15%.

Sounds like you've got it! Just to make sure: remember that capital gains stack on top of other income, so if you end you end up at say $70k of taxable income before capital gains only $10,200 of capital gains will be taxed at 0%.

[SeattleCPA]

Regarding the Sec. 199A "20% of qualified business income" deduction,

With taxable income of $157,500 ($315,000 if married), W-2 wages and depreciable property begin to limit deduction with full limitations occurring at $207,500 ($415,000 if married)

With with taxable income of $157,500 ($315,000 if married), income from a "specified service trade or business" begins to lose deduction with full loss occurring at $207,500 ($415,000 if married)

[CCCA]

Here's my list.  It sounds like you might be a family of 3; if so and you live in the lower 48 then this list should apply directly to you.  If you have more than one child, then the numbers obviously change:

Single / family of 3 (new tax bill)

$200,000   Child tax credit phaseout starts $50 per $1000
$90,000   American opportunity tax credit phaseout ends
$82,500   Top of 22% bracket
$81,680   ACA tax credit maximum (family of 3) (400% FPL 2018)
$80,000   American opportunity tax credit phaseout starts
$80,000   Student loan interest deduction phaseout ends
$80,000   Tuition and fees deduction phaseout ends
$66,000   Lifetime learning credit phaseout ends
$65,000   Student loan interest deduction phaseout starts
$65,000   Tuition and fees deduction phaseout starts
$56,000   Lifetime learning credit phaseout starts
$51,050   CSR 73 ACA cost sharing reduction (family of 3) (250% FPL 2018)
$49,999   Simplified EFC calculation qualification (plus other criteria)
$45,007   Earned income tax credit
$40,840   CSR 87 ACA cost sharing reduction (family of 3) (200% FPL 2018)
$38,700   Top of 12% bracket
$38,600   Top of 0% capital gains rate
$31,000   Retirement savings credit
$30,630   CSR 94 ACA cost sharing reduction (family of 3) (150% FPL 2018)
$25,000   Automatic zero EFC for college (as of 2018/2019 FAFSA year; need to update)
$9,525   Top of 10% bracket

HTH.

Great list!

I believe the spreadsheet includes all except the crossed-out items.

thanks for the extensive list @secondcor521 and thanks for the spreadsheet @MDM.  Looks like I have some research to do, but these will be a huge help.

[stoaX]

Here's my list.  It sounds like you might be a family of 3; if so and you live in the lower 48 then this list should apply directly to you.  If you have more than one child, then the numbers obviously change:

Single / family of 3 (new tax bill)

$200,000   Child tax credit phaseout starts $50 per $1000
$90,000   American opportunity tax credit phaseout ends
$82,500   Top of 22% bracket
$81,680   ACA tax credit maximum (family of 3) (400% FPL 2018)
$80,000   American opportunity tax credit phaseout starts
$80,000   Student loan interest deduction phaseout ends
$80,000   Tuition and fees deduction phaseout ends
$66,000   Lifetime learning credit phaseout ends
$65,000   Student loan interest deduction phaseout starts
$65,000   Tuition and fees deduction phaseout starts
$56,000   Lifetime learning credit phaseout starts
$51,050   CSR 73 ACA cost sharing reduction (family of 3) (250% FPL 2018)
$49,999   Simplified EFC calculation qualification (plus other criteria)
$45,007   Earned income tax credit
$40,840   CSR 87 ACA cost sharing reduction (family of 3) (200% FPL 2018)
$38,700   Top of 12% bracket
$38,600   Top of 0% capital gains rate
$31,000   Retirement savings credit
$30,630   CSR 94 ACA cost sharing reduction (family of 3) (150% FPL 2018)
$25,000   Automatic zero EFC for college (as of 2018/2019 FAFSA year; need to update)
$9,525   Top of 10% bracket

HTH.

Great list!

I believe the spreadsheet includes all except the crossed-out items.

thanks for the extensive list @secondcor521 and thanks for the spreadsheet @MDM.  Looks like I have some research to do, but these will be a huge help. 

Agreed - this is a very helpful list...much appreciated.   And dang, what a complex world we live in!

[Paul der Krake]

edit: updated with the 2018 numbers

Don't forget the mother of all thresholds, the EITC cliff of death (suddent and immediate disqualification) if you earn more than $3,500 in investment income. If you receive $3,501 of investment income, that extra dollar could cost you as much as $6,431 in forfeited tax credits! That's one hell of a marginal rate.

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eitc-income-limits-maximum-credit-amounts-next-year