Author Topic: Republican Tax Plan 2017  (Read 72138 times)

dragoncar

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Re: Republican Tax Plan 2017
« Reply #150 on: November 03, 2017, 05:50:39 PM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

frugalecon

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Re: Republican Tax Plan 2017
« Reply #151 on: November 03, 2017, 05:53:50 PM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

Undecided

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Re: Republican Tax Plan 2017
« Reply #152 on: November 03, 2017, 05:56:56 PM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

True, but, it's that "lost the ability to itemize" point that will affect many. 75% of my itemized deduction this year will be state income taxes. My mortgage interest and property taxes on their own would be well shy of the standard deduction.

dragoncar

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Re: Republican Tax Plan 2017
« Reply #153 on: November 03, 2017, 05:57:09 PM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

Ah gotacha.  That might be true for me too, since state taxes were always greater than the standard deductiob

nalor511

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Re: Republican Tax Plan 2017
« Reply #154 on: November 03, 2017, 06:06:22 PM »
I would love to see the US stop taking citizens when residing outside the country.

If you mean taxing, then YES, me too :-)  Or at least apply the corporate rate for foreign profits of 12%...

Thanks autocorrect. Yes, taxing. The fact that this bill no longer taxes foreign corporate income, but the US is still trying to tax worldwide income for non-resident citizens boggles my mind.

Viking Thor

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Re: Republican Tax Plan 2017
« Reply #155 on: November 03, 2017, 06:09:05 PM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?
If passed as is, there is no state income tax deduction and property tax deduction is limited to max $10k. The standard deduction for married couple would be $24k. Given this, very few people would benefit from itemizing (mortgage interest plus the capped property tax is typically not too going to exceed $24k, and if exceeding it will be a much smaller benefit than before)

So depending on home interest rate, paying down could be more attractive relative to what it was before, if you were previously getting a tax benefit. You still have to decide if it's more attractive than other investment options.

MDM

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Re: Republican Tax Plan 2017
« Reply #156 on: November 03, 2017, 06:11:32 PM »
The point being that those tax benefits, for probably a majority of the country, are more imagined than real.
A lot of people get these deductions nationwide
Both statements are true.

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #157 on: November 03, 2017, 06:20:46 PM »
Here is the proposed "postcard" tax return... seems pretty simple to me.



Okay.  While I am generally in favor of the bill so far, I've got to call BS on this.  Interest income?  Dividends?  Capital gains?  Pension income?  IRA distributions?  Social Security income?  And that's just a few excerpts from the current 1040.  If I dozed off and missed the part that I won't have to report any of those anymore; GREAT!!!

It seems that nobody remembers that this "file on a postcard" verbage was introduced by Reagan when he was selling his tax cuts. Those tax cuts are still generally applauded, but we never got anywhere close to postcard-level simplification.  Not that this would be a good thing......
« Last Edit: November 03, 2017, 06:23:22 PM by FIREchiefsr »
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teen persuasion

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Re: Republican Tax Plan 2017
« Reply #158 on: November 03, 2017, 07:53:03 PM »
Here is the proposed "postcard" tax return... seems pretty simple to me.


I don't see that Retirement Saver's credit.  Did I miss where that got cut?

Undecided

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Re: Republican Tax Plan 2017
« Reply #159 on: November 03, 2017, 08:26:49 PM »
Here is the proposed "postcard" tax return... seems pretty simple to me.


I don't see that Retirement Saver's credit.  Did I miss where that got cut?

Sweet, no penalty for under-withholding!

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Re: Republican Tax Plan 2017
« Reply #160 on: November 03, 2017, 08:31:29 PM »
Here is the proposed "postcard" tax return... seems pretty simple to me.



If people are going to keep quoting this post, can you guys edit it to have a reasonable "width" tag? It really improves readability.

Example:

Code: [Select]
[img width=600]https://loudermilk.house.gov/uploadedphotos/highresolution/b753c229-0daf-437b-a60d-cee9dd9d6b0d.jpg[/img]
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MDM

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Re: Republican Tax Plan 2017
« Reply #161 on: November 03, 2017, 08:38:07 PM »
Here is the proposed "postcard" tax return... seems pretty simple to me.
<snip>
I don't see that Retirement Saver's credit.  Did I miss where that got cut?
AFAIK it remains.

The saver's credit is authorized by Section 25B (see 26 U.S. Code ß 25B - Elective deferrals and IRA contributions by certain individuals | US Law | LII / Legal Information Institute) of the tax code.  The only thing I could find in the new bill that even comes close is the quote below.

Quote
(c) TERMINATION OF SECTION 25.óSection 25, as
2 amended by section 3601, is amended by adding at the
3 end the following new subsection:
4 ĎĎ(k) TERMINATION.óNo credit shall be allowed
5 under this section with respect to any mortgage credit cer6
tificate issued after December 31, 2017.íí.

sol

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Re: Republican Tax Plan 2017
« Reply #162 on: November 03, 2017, 08:56:53 PM »
Frankly I don't see how that "postcard" is any better than the one-page 1040EZ it would replace.  They just removed the top third of the form where you have to put your name and all of your personal info, and the bottom third where you have to sign and authorize, and presumably you'll still have to put all of that on the new form.

Anybody who has a schedule E won't be able to use it (landlords).  Anybody who takes the foreign tax credit can't use it (indexers).  They've left out the separate worksheets for things like calculating the child tax credits and investment taxes.  They haven't simplified anything, they've just left out all of the information required to figure out what numbers to put into the same number of boxes.  I don't think this is an improvement.

On the other hand, I don't think simplification is really the goal here.  More like "signalling that the IRS won't double check you and you can put whatever you want on your tax forms because there is no required documentation of anything."

Paul der Krake

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Re: Republican Tax Plan 2017
« Reply #163 on: November 03, 2017, 10:15:29 PM »
This looks like a win for high earners who don't itemize, right?

secondcor521

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Re: Republican Tax Plan 2017
« Reply #164 on: November 03, 2017, 10:22:44 PM »
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers.  Presumably because with the elimination of many deductions and an increase in the standard deduction, fewer people will have to itemize and can therefore skip schedule A.  I assume that for the other 10%, there will still be a full form 1040 and schedules and forms to fill out to collect all of the deductions and whatnot that apply.

In other word, don't read the postcard image and assume that it covers everyone and every situation.  It certainly doesn't.  I'm personally not even sure if the postcard thing is real or going to happen; I think it's just an attempt by Republicans to drive home the tax simplification message.

(For the record, IMHO it does simplify things for me on taxes, but I think they could have done much more simplification.  I think in at least some cases they added some complications (the new $300 credit, and the 45.6% stealth bracket are two examples).)
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MDM

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Re: Republican Tax Plan 2017
« Reply #165 on: November 03, 2017, 10:52:56 PM »
Until one can find a "Form 1040-Postcard" on the IRS site, it seems a safe assumption that the postcard is a stage prop, not a serious proposal.

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #166 on: November 04, 2017, 01:21:22 AM »
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers. 

Do 90% of taxpayers have no interest income, dividends or capital gains?  Maybe, I just don't know....

Why are you wasting your time listening to what comes out or politicians' mouths???
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Ocinfo

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Re: Republican Tax Plan 2017
« Reply #167 on: November 04, 2017, 06:20:12 AM »
This looks like a win for high earners who don't itemize, right?

Yes, it’ll be about an 11% cut for me. MFJ, rent primary residence with around $200k income after maxing retirement accounts, etc...I don’t want it or need it. It’s also likely a win for some high earners that itemize as they’ll lose some deductions but not having AMT could be huge (e.g., we know Trump paid $30+ million due to AMT in 2005).


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boarder42

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Re: Republican Tax Plan 2017
« Reply #168 on: November 04, 2017, 06:47:45 AM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

You should be putting this money in the market during the growth stage anyways. You're not even keeping up with inflation with your strategy. A 3% mortgage shouldn't be paid down and you should invest the money in vtsax or something similar
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boarder42

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Re: Republican Tax Plan 2017
« Reply #169 on: November 04, 2017, 06:49:29 AM »
Statements I heard from Paul Ryan on the news yesterday lead me to believe that the "file on a postcard" idea is intended to apply to about 90% of (individual?) taxpayers. 

Do 90% of taxpayers have no interest income, dividends or capital gains?  Maybe, I just don't know....

Why are you wasting your time listening to what comes out or politicians' mouths???

Really wouldn't be too hard to add those lines.
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frugalecon

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Re: Republican Tax Plan 2017
« Reply #170 on: November 04, 2017, 06:57:12 AM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?

Yes, that is true, but other aspects of the plan eliminate the advantage of itemizing for me. If state and local income taxes are not deductible, my household would take the standard deduction. Thus, the after tax cost of the mortgage is just the headline interest rate, while we would still pay tax on, e.g., interest from CDs.

You should be putting this money in the market during the growth stage anyways. You're not even keeping up with inflation with your strategy. A 3% mortgage shouldn't be paid down and you should invest the money in vtsax or something similar

I donít dispute that equities have a higher expected return, but you seem to not be aware that inflation has been averaging below 2% in recent years. A nominal after tax return of 3% does exceed the current inflation rate, as well as the likely inflation rate in the near to medium term.
« Last Edit: November 04, 2017, 07:06:52 AM by frugalecon »

secondcor521

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Re: Republican Tax Plan 2017
« Reply #171 on: November 04, 2017, 08:38:20 AM »
Why are you wasting your time listening to what comes out or politicians' mouths???

They amuse and irritate me, the latter of which I sometimes find oddly entertaining.
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Undecided

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Re: Republican Tax Plan 2017
« Reply #172 on: November 04, 2017, 09:49:21 AM »
Am I the only one who finds it odd that three of the four proposed married, filing jointly brackets start at twice the level that applies to single filers, while the 35% bracket does not? Thatís the kind of distorting complexity I thought the Republicans were keen to leave behind.

Peter Parker

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Re: Republican Tax Plan 2017
« Reply #173 on: November 04, 2017, 09:59:36 AM »
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"

achvfi

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Re: Republican Tax Plan 2017
« Reply #174 on: November 04, 2017, 10:14:45 AM »
Found this article.
Seems like there are few provisions to make 401k more flexible.
https://finance.yahoo.com/news/good-news-401-k-tax-090116382.html

Also an interesting article how the taxes may raise on middle class due to inflation adjustment related gimmicks and tax credit expirations.

https://medium.com/@kamin_83016/how-a-tax-cut-turns-into-a-tax-increase-960c32d1ba82
OR
https://slate.com/business/2017/11/the-sneaky-ways-republicans-would-raise-taxes-on-the-middle-class.html

RangerOne

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Re: Republican Tax Plan 2017
« Reply #175 on: November 04, 2017, 10:37:23 AM »
Essentially making it so nearly no one itimize is the real simplification here. But there is no reason that has to mean we raise taxes of home owners... I guess we will find out how much sway upper middle income families have as I almost grantee you every family making over $125k with kids and a home would see a tax increase.

If we want to remove home ownership incentives I think it should happen in phases to let the market adapt to each change. First tax and stop foreign buying.. next take away tax breaks for second homes. Finally they can considering removing primary home breaks. Though I always thought it was a reasonable goal to encourage home ownership of at least a families primary residence.

ncornilsen

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Re: Republican Tax Plan 2017
« Reply #176 on: November 04, 2017, 10:38:43 AM »
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"

Consumption taxes are inherently the most regressive form of taxation that exists.  No matter how you exempt certain goods or purchases, wealthy people have the flexibility to avoid them, poor/middle class people don't. Research yacht taxes, for one thing. The only people who felt the pinch of that one was the middle class yacht builders.


Peter Parker

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Re: Republican Tax Plan 2017
« Reply #177 on: November 04, 2017, 10:46:48 AM »
What would be so wrong with eliminating income taxes (and most of the IRS), instituting a consumption tax (which may have a negative effect on the economy by discouraging purchases) AND keeping an Estate Tax (capped at 5 million or some other number) which would have the positive effect of stimulating the economy by encouraging one to spend it or lose it....

The use of the tax code of as an award to lobbyist and/or social engineering seems counter-intuitive to a capitalistic society.  I like the idea of a consumption tax (and estate tax) because it is naturally progressive.  Don't by a car-0% tax.  Buy a Prius X% tax paid.  Buy a Rolls Royce pay Y%

Playing the existing game of "beating the system" (and who's better at it than us Mustachians? :-))  is really kind of ridiculous when you think about it.  Think about the wasted money that goes into such shell games--financial planners, CPA's, tax attorneys, tax preparers, and  a whole governmental agency (IRS)--all being paid for to create nothing (other than a plan to game the system).  This is such a waste of resources.

The Republicans talk about the new tax plan's simplicity.  "You can simply do your taxes on a post-card sized return!"  But I'm a little skeptical.  It seems like they are really saying is:  "We've taken away all the deductions that were available to everyday, common folk.  Now we can simply take your money if you sign this post-card.  LOOK how simple that was!"

Consumption taxes are inherently the most regressive form of taxation that exists.  No matter how you exempt certain goods or purchases, wealthy people have the flexibility to avoid them, poor/middle class people don't. Research yacht taxes, for one thing. The only people who felt the pinch of that one was the middle class yacht builders.

...But if they were faced with stiff Estate Taxes, they would either buy the yacht while they are alive or give their money to the government when they die....

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Re: Republican Tax Plan 2017
« Reply #178 on: November 04, 2017, 10:51:57 AM »
It seems this bill potentially would make it much more attractive to pay off an outstanding mortgage. I have 9 years to go in a 3% 15 year mortgage, and currently my after tax rate is a hair below 2%. If I lose the ability to itemize, I now have a 3% after tax guaranteed rate. That is way better than any other taxable fixed rate alternative.

I donít think this applies to existing mortgages, and going forward $500k is still deductible no?


Oh, I thought it would affect current owners as well.  I was about to say that that was incorrect, but googled it and found this line in a fortune article:


Quote
If you already own your home, changes to the mortgage interest and property tax deductions wonít impact you. But the proposals will hit close to home with home buyers, who could see big changes in their future federal tax bills.

well that's better for us than I thought.  I was expecting a big reduction in the amount we could deduct between mortage interest and property tax.
« Last Edit: November 04, 2017, 08:43:48 PM by CCCA »
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TheAnonOne

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Re: Republican Tax Plan 2017
« Reply #179 on: November 04, 2017, 11:07:39 AM »
Can someone help me out?

In MN with a HHI of 225->250k (probably closer to 190->210 after 401ks, HSA, ect) with a state tax level between 5% and 7%. 2 people 0 kids, small 60k mortgage and no debt.

Are my taxes going up or down? My back of the napkin math basically showed it being less tax until I couldn't deduct state taxes anymore. So I came up with basically no change. Am I sort of right?

Thanks!

boarder42

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Re: Republican Tax Plan 2017
« Reply #180 on: November 04, 2017, 11:38:19 AM »
Am I the only one who finds it odd that three of the four proposed married, filing jointly brackets start at twice the level that applies to single filers, while the 35% bracket does not? Thatís the kind of distorting complexity I thought the Republicans were keen to leave behind.

At first glance this appears to be a wtf are you taking mfj more for but. Upon further examination they likely raised the single person to account make it so the death of a spouse doesn't have rmds hit the surviving spouse as hard.
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Re: Republican Tax Plan 2017
« Reply #181 on: November 04, 2017, 12:22:34 PM »
I will tell you what they spend it on - nice dorms, organic food in the food court, luxury bulding renovations, professorships paying 500K a year, university administrators getting 500K- 1MM in salary, etc. They for sure don't spend it on research as that is ALL funded with outside grants. This is how it works in higher ed.  And of course students whose families make less than 50K a year go for free. That is 1% of their class. I know that for a fact.
I spent a little bit of time working in university development (i.e., the people that collect donations) and quite frankly, most people know shockingly little about how the endowments actually work. Here's the short version:

It's not a single giant pot of money, despite the fact that it's reported in aggregate. Instead, the money goes where the donor designates it, whether that be a "general fund" or "scholarships for students studying underwater basket-weaving." Legally the university can only spend the funds on their designated purposes and if it's a true endowment, then you can cannot touch the principle.

So what does that mean in terms of a tax on net investment income? Basically it means that whomever wrote it doesn't understand how they work and if it goes though, a giant headache for universities. Most likely a giant headache for the IRS as well in terms of actually auditing the provision as well. Plus, only targeting private universities seems spiteful given that there are public universities with massive endowments as well (e.g. University of Michigan ~$11B, Stanford ~$22B).

Bingo, Panda. Most people don't realize how restricted endowments are in terms of use. And while there are some very well compensated professors, 500k is a bit extreme. To say this is the exception is an understatement.

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Re: Republican Tax Plan 2017
« Reply #182 on: November 04, 2017, 01:06:51 PM »
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Re: Republican Tax Plan 2017
« Reply #183 on: November 04, 2017, 02:00:37 PM »
A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the so-called pass-through rate. There will be some guardrails on what kinds of businesses can claim this rate, to avoid individuals abusing the lower tax. Seems reasonable that legit small businesses shouldn't be taxed at a higher rate than corporations, though it looks like there will still be a difference.
Unless Iím missing something his doesnít make any sense to me.  Why should a pass-through entity (eg contractor) pay a lower rate than an individual (eg salaried employee)?  The comparison to corporate rates is not aptó corporations are not pass through, so the dividends they pay are taxed (the oft maligned double taxation, but itís explained by the lower corporate tax rate and internal reinvestment tax deferral).  I have no problem with small businesses paying the corporate tax rate as long as their owners also pay taxes on their withdrawals from the business account

You may have overlooked S Corporations, which are pass thru... No tax on dividends...

sol

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Re: Republican Tax Plan 2017
« Reply #184 on: November 04, 2017, 08:01:02 PM »
They changed the tax plan today, to raise the tax brackets.  This means higher taxes on everyone.

https://www.cbsnews.com/news/house-gop-quietly-changes-tax-bill-to-tax-income-at-higher-rates-over-time/

obstinate

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Re: Republican Tax Plan 2017
« Reply #185 on: November 04, 2017, 09:16:55 PM »
This looks like a win for high earners who don't itemize, right?
Yes, but it's somewhat of a hit for those of us who do itemize. I'll face lower tax rates, but about 80k in local income taxes will no longer be deductible. This will cost me more than my savings.

That's without factoring in the corporate tax rate changes, though. I own a slice of the overall body of US corporations, which are currently taxed at 35% on marginal profits. In the future, they'll be taxed at 20%. But, they'll lose some undetermined loopholes. I have no idea how to estimate what this does to the value of my portfolio, but I suppose it will, as a first order effect, increase corporate profits by 5-10%.

Transitively, you'd expect it to have a similar effect on my portfolio. If it does, and I expect approximately 5% real return on investment, that means I can now expect between 0.25 and 0.5 points of increased ROI. This would be enough to offset the increased taxes I'll face due to being unable to deduct state and local income taxes. But if I hadn't accumulated a lot of savings during the past decade, this would hurt bad.

This tax cut really seems to favor high wealth people over high income people. It seems like high income folks don't get much out of it. But maybe I'm mistaken.

sol

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Re: Republican Tax Plan 2017
« Reply #186 on: November 04, 2017, 09:22:40 PM »
corporations, which are currently taxed at 35% on marginal profits. In the future, they'll be taxed at 20%. But, they'll lose some undetermined loopholes.

Don't hold your breath.  All that talk about closing corporate loopholes was just smokescreen.  As far as I can tell, nothing about the corporate tax code changes at all, except slashing the rate to 20%.

The carried interest loopholes stayed.
All of the oil and gas loopholes stayed.
The offshore income loopholes stayed.
The capital equipment write-offs stayed, and were even expanded.
The credit union exemption stayed
The medical and pharma exemptions stayed.

Really, I don't see any corporate loopholes closed at all.  Under the current system, US corporations have a nominal 35% rate but pay more like 18.5%, after loopholes.  So they shelter about 16.5% of their income?  If they still get to do all of that, but the nominal rate is now 20%, doesn't that mean that the effective 2018 corporate tax rate can be expected to be 20-16.5 = 3.5%?  How can Treasury possibly justify cutting revenues from 18.5 to 3.5%?

Ooooooh right, they raised income taxes on middle-class individual consumers.  Well, that makes me feel much better now.  Tax people more so that you can tax businesses less, but blow up the deficit while you're at it?  Is that what Republicans are selling these days?
« Last Edit: November 04, 2017, 09:32:45 PM by sol »

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #187 on: November 04, 2017, 09:48:57 PM »
Tax people more so that you can tax businesses less, but blow up the deficit while you're at it?  Is that what Republicans are selling these days?

Was that a rhetorical question?   LOL
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MDM

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Re: Republican Tax Plan 2017
« Reply #188 on: November 04, 2017, 10:28:59 PM »

NorthernBlitz

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Re: Republican Tax Plan 2017
« Reply #189 on: November 05, 2017, 01:27:02 AM »
Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
[/quote]

+1 with this. I would think a progressive tax here would be a good idea so that places with massive endowments would pay > 1.5%. The endowments at some of these places are just enormous.

Quote
Increasing the debt in times of economic prosperity is  so dumb. This entire circus and their tax plan reminds me of a local bar slogan : "we cheat the other guy and pass the savings on to you".
[\quote]

+ 1 (or I guess +19 Trillion (and counting!))
« Last Edit: November 05, 2017, 01:41:42 AM by NorthernBlitz »

Embok

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Re: Republican Tax Plan 2017
« Reply #190 on: November 05, 2017, 01:40:55 AM »
Ptf, partly because I will be completely screwed if this passes.

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Re: Republican Tax Plan 2017
« Reply #191 on: November 05, 2017, 04:02:40 AM »
As far as the simplification goal, I think getting rid of AMT does simplify things a lot. 

To the poster worried that the bill did not explicitly delete prior amendments to the code:  If a particular section is deleted, it is deleted with all prior amendments to that particular section.  No need to say that specifically.



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Re: Republican Tax Plan 2017
« Reply #192 on: November 05, 2017, 04:25:29 AM »
I'm missed the elimination of the 5k for childcare deduction. That's 1250 in savings gone for us when we have kids. I thought this was an area that they were looking to expand.
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brian313313

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Re: Republican Tax Plan 2017
« Reply #193 on: November 05, 2017, 04:57:42 AM »
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.

BTDretire

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Re: Republican Tax Plan 2017
« Reply #194 on: November 05, 2017, 05:29:07 AM »

Qualified dividends, however (I think), will no longer be treated the same as LTCG, but rather included in taxable income at 1/2 the dividend amount and taxed from there.

"The bill makes no changes to long-term capital gains tax rates, which also apply to qualified dividends. These rates are currently 0% for taxpayers in the two lowest tax brackets, 15% for the next four brackets, and 20% for taxpayers in the highest tax bracket. This proposal keeps the same income thresholds in place that apply to these rates now."
https://www.fool.com/investing/2017/11/03/ask-a-fool-how-could-the-tax-reform-bill-affect-in.aspx
"Above all, it's important to point out that the tax reform effort is still a very fluid situation, and a final bill is likely to look significantly different than the one that was just released."

 I'm very close to living off my stache, Dividends and Capital Gains tax right will matter to me.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #195 on: November 05, 2017, 06:07:07 AM »
Really, I don't see any corporate loopholes closed at all.  Under the current system, US corporations have a nominal 35% rate but pay more like 18.5%, after loopholes.  So they shelter about 16.5% of their income?  If they still get to do all of that, but the nominal rate is now 20%, doesn't that mean that the effective 2018 corporate tax rate can be expected to be 20-16.5 = 3.5%?  How can Treasury possibly justify cutting revenues from 18.5 to 3.5%?
Thought experiment: if they lowered the notional rate to 10%, would the average profitable corporation be getting a fat check from the federal government every year? Of course not.

I've seen you post for a long time here and you seem to have a handle on math. With that combination, you can't possibly think that's how the math applies here...

Here's how it will work, taking some wildly simplifying assumptions:
Imagine a corporation that has a 35% nominal rate and an effective rate of 18.5% (I didn't check your sources; I trust you for this analysis). That means for a notional $100 of profit, they had "loopholes" for $47 of income and were taxed 35% on $53 of income-after-loopholes to pay that $18.55 of tax on $100 of notional profit.

Under a new scheme, with no changes to loopholes, they'll be taxed 20% on that $53, or $10.60 or 10.6% effective rate, not a 3.5% rate.

Bird In Hand

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Re: Republican Tax Plan 2017
« Reply #196 on: November 05, 2017, 06:19:37 AM »
I'm missed the elimination of the 5k for childcare deduction. That's 1250 in savings gone for us when we have kids. I thought this was an area that they were looking to expand.

There's also a child and dependent care tax credit (CDCC) -- at > $43k AGI, you get a credit of 20% of your first $3,000 of expenses for one child ($600 max credit) or up to $6,000 for 2+ ($1,200 max credit).  In the current code you can only use the CDCC for expenses that exceed what you've put in your DCFSA.  So if you max out your DCFSA ($5k) then with 1 child you can't use the CDCC; with 2 children you get a $200 credit (assuming your child care expenses were at least $6,000).  With that same assumption:

Under the current code with 1 kid your taxes are reduced by $1,250 (DCFSA)
Under the current code with 2+ kids your taxes are reduced by $1,250 (DCFSA) + $200** (CDCC) = $1,450

Under the new plan with 1 kid your taxes are reduced by $600 (CDCC)
Under the new plan with 2+ kids your taxes are reduced by $1,200 (CDCC)
------

tl;dr: you come out $650 behind in the new plan with 1 kid, and $250 behind with 2+ kids.
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maizeman

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Re: Republican Tax Plan 2017
« Reply #197 on: November 05, 2017, 06:27:48 AM »
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.

From the coverage I found online, the receiving spouse will no longer pay taxes on alimony payments under the revised bill. It'll still increase total taxes payed on alimony payments somewhat, since the person paying the alimony is generally going to be in a higher tax bracket than the person receiving the alimony, but it sounds like it wouldn't be a double taxation situation. It's also worth noting that child support was taxed this way (on the tax return of the parent who receives the money, not the tax return of the parent who receives the support) already so at least the two are being treated consistently now.

In googling around to try to find an answer to this question, I also stumbled across this statistic: "More than a half-million taxpayers claimed alimony deductions totaling more than $10 billion in 2010 ... Yet recipients' reported alimony income was $2.3 billion less."
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dresden

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Re: Republican Tax Plan 2017
« Reply #198 on: November 05, 2017, 06:56:32 AM »
Frankly I don't see how that "postcard" is any better than the one-page 1040EZ it would replace.  They just removed the top third of the form where you have to put your name and all of your personal info, and the bottom third where you have to sign and authorize, and presumably you'll still have to put all of that on the new form.

Anybody who has a schedule E won't be able to use it (landlords).  Anybody who takes the foreign tax credit can't use it (indexers).  They've left out the separate worksheets for things like calculating the child tax credits and investment taxes.  They haven't simplified anything, they've just left out all of the information required to figure out what numbers to put into the same number of boxes.  I don't think this is an improvement.

On the other hand, I don't think simplification is really the goal here.  More like "signalling that the IRS won't double check you and you can put whatever you want on your tax forms because there is no required documentation of anything."

I think a high percentage efile anyhow to get their refunds back faster - not sure the postcard means much.  I wish they would address some of the predatory practices like tax refund loans that target the poor.

dresden

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Re: Republican Tax Plan 2017
« Reply #199 on: November 05, 2017, 07:17:29 AM »
It seems good for me. I don't have a mortgage, but if I did it would still be under the mortgage deduction as is so I don't itemize. The only thing I may disagree with is Alimony. The reason being is that the recipient pays income tax on this so if both sides have to start paying it seems that it's double-taxed. It doesn't affect me personally though.

From the coverage I found online, the receiving spouse will no longer pay taxes on alimony payments under the revised bill. It'll still increase total taxes payed on alimony payments somewhat, since the person paying the alimony is generally going to be in a higher tax bracket than the person receiving the alimony, but it sounds like it wouldn't be a double taxation situation. It's also worth noting that child support was taxed this way (on the tax return of the parent who receives the money, not the tax return of the parent who receives the support) already so at least the two are being treated consistently now.

In googling around to try to find an answer to this question, I also stumbled across this statistic: "More than a half-million taxpayers claimed alimony deductions totaling more than $10 billion in 2010 ... Yet recipients' reported alimony income was $2.3 billion less."
  Sounds great for the attorneys - all the #s will need to be recalculated.