Author Topic: Republican Tax Plan 2017  (Read 72134 times)

WoodSpinner

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Re: Republican Tax Plan 2017
« Reply #300 on: November 08, 2017, 10:39:28 AM »
Can anyone clarify the change on page 143 of the PDF above?

Quote
SEC. 1501. REPEAL OF SPECIAL RULE PERMITTING RE-CHARACTERIZATION OF ROTH IRA CONTRIBUTIONS AS TRADITIONAL IRA CONTRIBUTIONS.
18 (a) IN GENERAL.—Section 408A(d) is amended by
19 striking paragraph (6) and by redesignating paragraph
20 (7) as paragraph (6).

I believe you have to cross-reference it with the current tax code to make any sense of it: https://www.law.cornell.edu/uscode/text/26/408A

Paragraph (6) that is being struck out:

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(6) Taxpayer may make adjustments before due date
(A) In general
Except as provided by the Secretary, if, on or before the due date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any contribution to an individual retirement plan made during such taxable year from such plan to any other individual retirement plan, then, for purposes of this chapter, such contribution shall be treated as having been made to the transferee plan (and not the transferor plan).
(B) Special rules
(i) Transfer of earnings
Subparagraph (A) shall not apply to the transfer of any contribution unless such transfer is accompanied by any net income allocable to such contribution.
(ii) No deduction
Subparagraph (A) shall apply to the transfer of any contribution only to the extent no deduction was allowed with respect to the contribution to the transferor plan.

My real question is whether this affects a backdoor roth or a mega backdoor roth? I've never done either so I'm not quite clear if a Roth -> Traditional re-characterization is part of the process.

Not sure if others have commented on this but it is significant change, essentially it eliminates the ability to re-characterize (e.g. reverse a Roth Conversion). Nice strategy to have if the assets converted have gone down drastically. See Kitces Analysis.

Not a deal breaker for me, but it was a nice part of my planned Roth Conversion strategy ....

NorthernBlitz

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Re: Republican Tax Plan 2017
« Reply #301 on: November 08, 2017, 10:48:13 AM »
Well, this would devastate us, as husband's tuition remission would become taxable (and is far higher than his stipend, which is already taxable). I think it'll hit graduate programs all over the country hard, frankly.

I always thought tuition remission not being taxable is quite unfair for university staff that does not have kids, or, already has advance degrees, or, cannot get an advanced degree due to their schedule not permitting it. I have personal knowledge of folks who send 3-4 kids to college through tuition remission, which amounts to 80K a year to 120K a year in that case tax free. While childless coworkers have to work exactly the same schedule, at exactly the same pay, and not have an opportunity for that benefit.

It seems unfair that it is touted as a benefit, but it only applies to selected folks. I don't know of any other company benefit that is selective, and although technically available to all staff, in practice advantages only select few, and is of that magnitude. I myself thought of actually working in higher ed when the child is old enough, just to take advantage of that benefit, realizing how 'special' it is!

Making it taxable is fair - it is income. Person still get a huge benefit, but instead of 47K a year tax free income, they will pay 12K a year for the education their kid is getting. Still a pretty big deal but seems more logical.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

There is a bit of an analogy to consumption taxes.

If you buy something on sale, you don't pay sales tax on the original price. Instead, you pay sales tax on the price you paid.

Tuition remission is kind of similar, where students are purchasing their access to education at a reduced price.
« Last Edit: November 08, 2017, 10:54:55 AM by NorthernBlitz »

djadziadax

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Re: Republican Tax Plan 2017
« Reply #302 on: November 08, 2017, 11:10:38 AM »
Well, this would devastate us, as husband's tuition remission would become taxable (and is far higher than his stipend, which is already taxable). I think it'll hit graduate programs all over the country hard, frankly.

I always thought tuition remission not being taxable is quite unfair for university staff that does not have kids, or, already has advance degrees, or, cannot get an advanced degree due to their schedule not permitting it. I have personal knowledge of folks who send 3-4 kids to college through tuition remission, which amounts to 80K a year to 120K a year in that case tax free. While childless coworkers have to work exactly the same schedule, at exactly the same pay, and not have an opportunity for that benefit.

It seems unfair that it is touted as a benefit, but it only applies to selected folks. I don't know of any other company benefit that is selective, and although technically available to all staff, in practice advantages only select few, and is of that magnitude. I myself thought of actually working in higher ed when the child is old enough, just to take advantage of that benefit, realizing how 'special' it is!

Making it taxable is fair - it is income. Person still get a huge benefit, but instead of 47K a year tax free income, they will pay 12K a year for the education their kid is getting. Still a pretty big deal but seems more logical.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

There is a bit of an analogy to consumption taxes.

If you buy something on sale, you don't pay sales tax on the original price. Instead, you pay sales tax on the price you paid.

Tuition remission is kind of similar, where students are purchasing their access to education at a reduced price.

Not a good analogy, since sales do not ADD to your income. In your analogy, you have a set amount of money to spend, and then you decide to spend it on a sale item. You keep more of what you already have. In your analogy, a scholarship would be the "coupon" you apply to get a lower price, and that currently is not taxed.

alexpkeaton

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Re: Republican Tax Plan 2017
« Reply #303 on: November 08, 2017, 12:28:11 PM »
It seems like it would be similar to the imputed income I pay tax on for my employer-provided life insurance. The income is reported on my W-2, but I don't never received any cash.

MDM

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Re: Republican Tax Plan 2017
« Reply #304 on: November 08, 2017, 05:58:30 PM »
New question.

Is the savers credit changed or eliminated? Sorry if this was already covered.
I think it stays, based on https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1758754/#msg1758754.

jean

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Re: Republican Tax Plan 2017
« Reply #305 on: November 08, 2017, 07:28:44 PM »
I see it this way - MFJ with 2 kids would pay 0% tax on first 55K of their income (24K standard deduction, 1600x2 child credit, 300x2 flex family credit) and then pay only $4200 for the max of $90000 for the 12% tax bracket. For many folks, their state and local taxes will be higher than their fed taxes. There must be many many families in that category since salaries outside of the costs are much lower. That is 4.5% federal tax rate without doing anything special, spending countless hours of doing taxes, going to H& R block, paying for Turbotax, etc etc. Seems like a pretty good deal to me.

I don't quite follow the math, but I'll assume you are correct for MFJ with 2 kids.  I don't love what happens in the upper middle class brackets, but I could stomach it if it weren't for the deep cuts for the extremely wealthy.    (Also, for that situation, turbotax or spending hours is not necessary under the current tax plan.  Even itemizing is straightforward.)  So, good deal for you maybe, but that doesn't make it a good plan.

Business Insider did some examples at various income points for singles and MFJ+2 kids.
Single: http://www.businessinsider.com/trump-tax-plan-take-home-pay-2017-9
MJF+2kids: http://www.businessinsider.com/trump-tax-plan-family-take-home-pay-changes-2017-11

They didn't do the math with the latest plan unfortunately, but the indicated who it will hurt - those who itemize but aren't super wealthy: http://www.businessinsider.com/trump-tax-plan-raise-taxes-middle-income-families-2017-9

Rural

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Re: Republican Tax Plan 2017
« Reply #306 on: November 08, 2017, 07:39:01 PM »
Well, this would devastate us, as husband's tuition remission would become taxable (and is far higher than his stipend, which is already taxable). I think it'll hit graduate programs all over the country hard, frankly.

I always thought tuition remission not being taxable is quite unfair for university staff that does not have kids, or, already has advance degrees, or, cannot get an advanced degree due to their schedule not permitting it. I have personal knowledge of folks who send 3-4 kids to college through tuition remission, which amounts to 80K a year to 120K a year in that case tax free. While childless coworkers have to work exactly the same schedule, at exactly the same pay, and not have an opportunity for that benefit.

It seems unfair that it is touted as a benefit, but it only applies to selected folks. I don't know of any other company benefit that is selective, and although technically available to all staff, in practice advantages only select few, and is of that magnitude. I myself thought of actually working in higher ed when the child is old enough, just to take advantage of that benefit, realizing how 'special' it is!

Making it taxable is fair - it is income. Person still get a huge benefit, but instead of 47K a year tax free income, they will pay 12K a year for the education their kid is getting. Still a pretty big deal but seems more logical.


Nothing to do with kids or staff. This is about graduate students on assistantships or fellowships - they will now have to pay tax on tuition remissions, usually at out of state rates.

Yep. DH's friends who are still in grad programs are freaking out about this. Especially since their program discourages them from getting outside jobs. They have 10-15k stipends but if this goes through they will be expected to pay taxes on an additional 40k. I know more than one person  who is trying to speed up their dissertation because of this.

DH's department is also nervous about this. He works at an R2 and it isn't the sort of program that independently wealthy students choose - they have lots of smart but first generation grad students in his program. If this goes through there is real concern that they won't be able to maintain their enrollment.


Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.


Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).

jean

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Re: Republican Tax Plan 2017
« Reply #307 on: November 08, 2017, 09:06:39 PM »
Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).

If they went the "no tuition for the PhD program" route, departments and universities would lose money.   You don't pay tuition, but the advisor generally pays for it from his grants.  I suppose they could reclassify as fees?  Anyway, i really really doubt this will be in any final tax bill that passes - but I'd be understandably panicked too.

My main reason for replying is surprise that you pay both parts of SS on stipend. Usually grad students do not pay any SS (and of course don't earn SS credits).  Do you get to choose to earn SS if you pay SS?  My understanding is that you don't pay any SS, but you do pay regular federal taxes which they will not withhold from the stipend for you.

ixtap

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Re: Republican Tax Plan 2017
« Reply #308 on: November 08, 2017, 09:17:45 PM »
Yes, my husband is at an R1; stipends are higher but outside employment is completely forbidden and the penalty is dismissal from the program if caught. They don't admit anyone without a support package, so perhaps they could just say "no tuition for the PhD program," I don't know.
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).

If they went the "no tuition for the PhD program" route, departments and universities would lose money.   You don't pay tuition, but the advisor generally pays for it from his grants.  I suppose they could reclassify as fees?  Anyway, i really really doubt this will be in any final tax bill that passes - but I'd be understandably panicked too.

My main reason for replying is surprise that you pay both parts of SS on stipend. Usually grad students do not pay any SS (and of course don't earn SS credits).  Do you get to choose to earn SS if you pay SS?  My understanding is that you don't pay any SS, but you do pay regular federal taxes which they will not withhold from the stipend for you.

This surprises me, as well. I did not pay SS, because I was not an employee. Also, since we were not employees, we did not receive health insurance, although as students we were required to have it. They insisted we would not want to be employees, because then we would have to pay FICA. No, the science PhDs didn't want to pay FICA, but then their advisors paid their health insurance out of their grants, as well as higher stipends.

radram

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Re: Republican Tax Plan 2017
« Reply #309 on: November 09, 2017, 06:42:08 AM »
New question.

Is the savers credit changed or eliminated? Sorry if this was already covered.
I think it stays, based on https://forum.mrmoneymustache.com/welcome-to-the-forum/republican-tax-plan-2017/msg1758754/#msg1758754.

Thanks for finding that.

djadziadax

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Re: Republican Tax Plan 2017
« Reply #310 on: November 09, 2017, 06:44:41 AM »
It seems like it would be similar to the imputed income I pay tax on for my employer-provided life insurance. The income is reported on my W-2, but I don't never received any cash.

Exactly!!

djadziadax

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Re: Republican Tax Plan 2017
« Reply #311 on: November 09, 2017, 07:41:28 AM »

I don't quite follow the math, but I'll assume you are correct for MFJ with 2 kids.  I don't love what happens in the upper middle class brackets, but I could stomach it if it weren't for the deep cuts for the extremely wealthy.    (Also, for that situation, turbotax or spending hours is not necessary under the current tax plan.  Even itemizing is straightforward.)  So, good deal for you maybe, but that doesn't make it a good plan.


Math:
Assume 90,000 income (to keep you in 12% bracket)
Minus    24,000 Standard deduction
Taxable  66,000 * 12%
Tax due  7,920
             Apply child credit x 2 (3,200) + family credit x2 (600) for total tax credit of 3,800.
Credits   3,800
Tax due  4,120 (7,920-3,800)

or         4.57%

The way Business Insider calculates taxes on 175K income is a bit disingenuous. They assume average itemized deduction according to IRS (from all tax returns). Red flag. They should have used the average of that income band, not average of all income bands.

Also, what is really fair tax? What is an income level at which you should not have to pay any taxes in order to offset the "tax cut" folks with 200K income are getting? I don't see any proposal for a fairer system? In Europe, for example, counties implement flat tax on all income - 10% or 15% tax that applies to everyone. Is that fair? Or is it better to have our tax system, but exclude all income up to 100K for families and 50K for individuals from all taxes?  Or should it be 120 for families? Where is the threshold for the tax system to be fair?

This is a very thorny question, but it is clear that the current system is not ideal. It is crazy to have to higher a consultant every year to figure out what taxes are owed. When I first started working, I pay way more tax than necessary due to not understanding the tax code and not having money to buy Turbotax. But folks that spend 400-500 dollars on tax accountants can save you 3K in taxes. Is that really fair? Is that really how a progressive tax system should work?

sokoloff

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Re: Republican Tax Plan 2017
« Reply #312 on: November 09, 2017, 08:03:48 AM »
This is a very thorny question, but it is clear that the current system is not ideal. It is crazy to have to [hire] a consultant every year to figure out what taxes are owed. When I first started working, I pay way more tax than necessary due to not understanding the tax code and not having money to buy Turbotax. But folks that spend 400-500 dollars on tax accountants can save you 3K in taxes. Is that really fair? Is that really how a progressive tax system should work?
Fairness doesn't play into compliance, IMO. People should comply with the laws and tax codes of the country, so if they are entitled by law/code to those $3K in savings and can achieve them by sending $400-500 (I wish I spent that little per year!!), then I think they should obviously do it.


jean

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Re: Republican Tax Plan 2017
« Reply #313 on: November 09, 2017, 08:04:58 AM »
Also, what is really fair tax? What is an income level at which you should not have to pay any taxes in order to offset the "tax cut" folks with 200K income are getting?
The 200k income group are not getting a tax cut if they itemize. I'm not really arguing whether this is a good or bad thing, it could be argued it is good.

However, I'm appalled at the repeal of the estate tax, not changing the step-up basis (heirs can sell inherited stocks without the earnings ever having been taxed), the repeal of the AMT, and other goodies for the very wealthy and certain types of business owners.  This seems blatantly unfair.  If they couple it with tax cuts for middle class families, they hope to sneak through these terrible policies that benefit the top 0.5%.

clutchy

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Re: Republican Tax Plan 2017
« Reply #314 on: November 09, 2017, 12:40:24 PM »
I've run through a couple of scenario's and the republican plan is a nightmare for my family. 


It's seems we're right in the sweet spot to get crushed. 

1. Pay high property taxes and state taxes (reduced)
2. don't get the child tax credit (increased but ineligible)
3. lose 4 personal exemptions (saved us $4k / yr.  gone.)
4. we itemize, but we'll have reduced itemizations due to #1 above. 

Our effective rate is a lot lower due to contributing to 401k's, HSA, dependent care etc...  which put us at a tolerable level. 


I think our tax is set to double.... :( 

you make plans based on current law and then all of that changes... super. 

So I get to pay increased taxes so the deficit can go up and the wealthy can more easily pass generational wealth?  BS....

GreenEggs

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Re: Republican Tax Plan 2017
« Reply #315 on: November 09, 2017, 12:50:39 PM »
Trump's making America great again, for Himself! 

 

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #316 on: November 09, 2017, 12:58:13 PM »
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #317 on: November 09, 2017, 06:17:54 PM »
Now I'm reading that the Senate hasn't even drafted a bill yet.  They have just released their two page "plan."   
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Rural

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Re: Republican Tax Plan 2017
« Reply #318 on: November 09, 2017, 06:19:40 PM »
Husband's stipend is not classed as earned income, so we're already paying the employer and employee parts of social security. Don't know what's going to happen, but I think it will be bad for STEM (because support is nearly universal).
I'm going to echo the others and say that doesn't sound right. I don't pay FICA on my pay from the university and I don't know why you would be paying FICA on unearned income anyway.


I may have this wrong; haven't done his taxes yet. But he's on a research fellowship and the legalities are very different from my own assistantships from grad school. Nothing withheld but taxes will be owed in his case. Maybe he won't have to pay the SS - I was extrapolating from my own self-employment and had just assumed. I guess I'd better dig deeper. Regardless, we're saving for taxes as if he'ss pay it, so that's good anyway.

Edit: found it. Not subject to FICA because not wages. Thanks, all. He already has far more credits than the minimum for SS, so no great loss there.
« Last Edit: November 09, 2017, 06:27:30 PM by Rural »

RangerOne

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Re: Republican Tax Plan 2017
« Reply #319 on: November 10, 2017, 09:30:02 AM »
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

If the above is true then they are indiscriminately trying to shafts middle income home owners out of a tax break.

Spitfire

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Re: Republican Tax Plan 2017
« Reply #320 on: November 10, 2017, 09:40:53 AM »
No matter what they do to itemized deductions, people are losing out if they double the standard deduction and get rid of personal exemptions. A high standard deduction messes with mortgage interest, property taxes, and most of all (in my opinion) charitable contributions.

jim555

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Re: Republican Tax Plan 2017
« Reply #321 on: November 10, 2017, 10:39:32 AM »
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.

sol

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Re: Republican Tax Plan 2017
« Reply #322 on: November 10, 2017, 10:39:58 AM »
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

The loss of SALT deductions would hit every state, but I think it would really only hit the very richest people because they've also raised the standard deduction to 24k.  We itemize property taxes and state taxes and mortgage interest (and charitable giving) for about 16k, plus we have 16k of exemptions, for 32k of tax-free income before we even start in with 401ks and our HSA.  Since the new plan would lose us the 16k of exemptions, the SALT deductions are suddenly useless because they total less than 24k anyway.  And that appears to be by design, because...

Around here, you'd need a mortgage worth well over a half million dollars to have your property tax and mortgage interest exceed the proposed $24k standard deduction, so the $500k mortgage deduction limit basically prevents anyone from itemizing (unless their charitable giving is tens of thousands of dollars per year). 

It's just a sneaky backdoor way to say "you can't itemize, everyone must take the standard deduction" without actually coming out and saying that. 


Daisy

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Re: Republican Tax Plan 2017
« Reply #324 on: November 10, 2017, 10:48:06 AM »
When they talk about removing SALT breaks in the Senate plan, this does not just impact high income tax states right? Because the local tax is what let's you deduct property tax. So killing that fucks Texas too. Since they make up for their lack of income tax with higher property tax. Or am I mixing this up and property tax deduction is preserved.

The loss of SALT deductions would hit every state, but I think it would really only hit the very richest people because they've also raised the standard deduction to 24k.  We itemize property taxes and state taxes and mortgage interest (and charitable giving) for about 16k, plus we have 16k of exemptions, for 32k of tax-free income before we even start in with 401ks and our HSA.  Since the new plan would lose us the 16k of exemptions, the SALT deductions are suddenly useless because they total less than 24k anyway.  And that appears to be by design, because...

Around here, you'd need a mortgage worth well over a half million dollars to have your property tax and mortgage interest exceed the proposed $24k standard deduction, so the $500k mortgage deduction limit basically prevents anyone from itemizing (unless their charitable giving is tens of thousands of dollars per year). 

It's just a sneaky backdoor way to say "you can't itemize, everyone must take the standard deduction" without actually coming out and saying that.

Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.

jim555

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Re: Republican Tax Plan 2017
« Reply #325 on: November 10, 2017, 11:20:03 AM »
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.
Nope, just a simple majority since it would be passed under the budget reconciliation rules as long as it is below the $1.5T limit
I thought the tax cuts would have to sunset at 10 years for it to pass a "Byrd bath".

wenchsenior

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Re: Republican Tax Plan 2017
« Reply #326 on: November 10, 2017, 12:00:45 PM »
Wouldn't this tax plan require 60 votes in the Senate?  How are 8 Dems going to go along with it?  Seems DOA unless they pull some gymnastics.
Nope, just a simple majority since it would be passed under the budget reconciliation rules as long as it is below the $1.5T limit
I thought the tax cuts would have to sunset at 10 years for it to pass a "Byrd bath".

I think the reasoning is similar to the tax cuts under W.  It's much harder to raise taxes than to cut them, so there's a decent chance that at the ten year mark at least some of these cuts will be made permanent by Congress, regardless of who is in power (as some were when the 10 year window on the Bush tax cuts expired).

sol

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Re: Republican Tax Plan 2017
« Reply #327 on: November 10, 2017, 12:38:05 PM »
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.

Daisy

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Re: Republican Tax Plan 2017
« Reply #328 on: November 10, 2017, 12:42:38 PM »
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.

Oh, OK.

Now that I have a paid off house the increased standard deduction is more beneficial to me than itemizing.

ritz

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Re: Republican Tax Plan 2017
« Reply #329 on: November 10, 2017, 12:47:25 PM »
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(

The only place I've seen it so far is here: http://thehill.com/policy/finance/359598-read-senate-gops-tax-bill

mousebandit

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Re: Republican Tax Plan 2017
« Reply #330 on: November 10, 2017, 12:53:48 PM »
It also seems that non-reimbursed employee expenses are gone, which will hit the tradesmen hard.  Many of them, those that do civil construction in particular, travel extensively to the different job sites.   It's not just upper middle class who have benefited from itemizing. 

Does anyone know if the Senate plan still reclassified the number of years you had to live in your home before sellering to avoid capital gains tax?  That will hit house hackers, among others. 

sol

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Re: Republican Tax Plan 2017
« Reply #331 on: November 10, 2017, 01:06:56 PM »
It also seems that non-reimbursed employee expenses are gone, which will hit the tradesmen hard.  Many of them, those that do civil construction in particular, travel extensively to the different job sites.   It's not just upper middle class who have benefited from itemizing. 

Yea, they've targeted tradesman, and teachers, and graduate students, and small business owners.  It's really kind of amazing how bad this plan is for all of the traditional GOP constituencies.  They threw EVERYONE under the bus in order to fund tax breaks for the ultra-wealthy.

On the bright side, at least they didn't follow their blueprint from the healthcare debate and also steal from the poor at the same time.  They seem to have learned how bad the optics were on their plan to end medicaid to fund tax breaks for the rich, so this new tax plan mostly ignores the poor and instead steals from the middle class to fund tax breaks for the rich.  I wouldn't exactly call that progress, though.

alexpkeaton

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Re: Republican Tax Plan 2017
« Reply #332 on: November 10, 2017, 01:30:11 PM »
Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

I have a high income and a large mortgage (not a large home). My tax lawyer an accountants are...TurboTax. There's no "finding" loopholes. And the word "loopholes" itself is a misnomer. Really we're talking about carve-outs and deductions that were put there by design, not some workaround.

Quote
One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.

It is unfair. It's called tax fraud.

boarder42

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Re: Republican Tax Plan 2017
« Reply #333 on: November 10, 2017, 01:34:21 PM »
Why would you complain about not itemizing if the new standard deduction was actually more than what you were itemizing before?

It's not more than I was itemizing before.  The new $24k standard deduction would be $8k less than the $32k of deductions and exemptions I'll claim this year.  I'm going to get taxed on $8,000 of extra income.

while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.
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Daisy

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Re: Republican Tax Plan 2017
« Reply #334 on: November 10, 2017, 01:49:00 PM »
Maybe this is the first step to simplify taxes. Once less people itemize, then they can go ahead and remove all sorts of deductions. Those that win with itemizing, in my opinion, are those with higher incomes and larger homes, as you state. They also have better tax lawyers and accountants to find these loopholes.

I have a high income and a large mortgage (not a large home). My tax lawyer an accountants are...TurboTax. There's no "finding" loopholes. And the word "loopholes" itself is a misnomer. Really we're talking about carve-outs and deductions that were put there by design, not some workaround.

Quote
One time I was out to dinner with a group and one girl was a real estate agent and she was bragging how she was going to "write off" our meal out as a business expense. I thought that was pretty unfair.

It is unfair. It's called tax fraud.

Yes but TurboTax is not free. I have had to pay for premium TurboTax while working due to the software being able to handle all of these special carve outs. Hopefully now FIREd I can use a simpler version of TurboTax. Even better would be to truly have it on a postcard and not even have to pay for TurboTax.

I've always said I'd rather pay a little more taxes if if meant simplifying the system.

Yes I do love the 401k tax deductability and all of that, but that just makes everything so complicated having separate accounts and such. I'm all for tax simplification. I'm not sure that's what the Republicans are proposing, but for now the increased standard deduction does benefit me.

I still think if your itemized deductions are above $24k that means you make a high income and/or have a large house with large interest payments. I'm OK with that.

Edited to add: Yes my friend would probably be committing fraud calling it a business dinner when actually it was a group of friends getting together for dinner. But I think these special carve outs and deductions set the stage for fraud. I'd much rather have a larger standard deduction and then no one can benefit from these special carve outs. And more likely to get audited. Make it simpler and there's less chance for fraud.
« Last Edit: November 10, 2017, 02:06:03 PM by Daisy »

sol

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Re: Republican Tax Plan 2017
« Reply #335 on: November 10, 2017, 01:52:53 PM »
while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.

The tax credit would increase $200 per year, offsetting some of my losses.  The family credit is temporary, so I don't really count that because I feel like it's just subterfuge to confuse the issue.  It's not really part of their long term tax plan, it's just a temporary measure to cover up the losses people like me will feel.

boarder42

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Re: Republican Tax Plan 2017
« Reply #336 on: November 10, 2017, 01:59:30 PM »
while you're going to be taxed on extra income and have a higher AGI you get credits that offset the losses of the personal exemptions.

The tax credit would increase $200 per year, offsetting some of my losses.  The family credit is temporary, so I don't really count that because I feel like it's just subterfuge to confuse the issue.  It's not really part of their long term tax plan, it's just a temporary measure to cover up the losses people like me will feel.

the tax credits i saw were an increase of 600 per year per child.
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sol

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Re: Republican Tax Plan 2017
« Reply #337 on: November 10, 2017, 02:17:56 PM »
the tax credits i saw were an increase of 600 per year per child.

The tax credits I saw where raised from $1k per child to $1200 per child.  I would love for you to be right, because I have so little faith in democracy these days that I think they'll actually pass this turkey.  Source for your $600 number?

MDM

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Re: Republican Tax Plan 2017
« Reply #338 on: November 10, 2017, 02:31:16 PM »
the tax credits i saw were an increase of 600 per year per child.

The tax credits I saw where raised from $1k per child to $1200 per child.  I would love for you to be right, because I have so little faith in democracy these days that I think they'll actually pass this turkey.  Source for your $600 number?
Perhaps the text below.  That's the non-refundable part.  The refundable, I think, was not increased as much.

(1) IN GENERAL.—Section 24(a) is amended—
19 (A) by striking ‘‘qualifying child’’ and inserting
20 ‘‘dependent’’,
21 (B) by striking ‘‘for which the taxpayer is al22
lowed a deduction under section 151’’, and
23 (C) by striking ‘‘an amount equal to $1,000.’’
24 and inserting the following: ‘‘an amount equal to—
VerDate 0ct 09 2002 10:46 Nov 02, 2017 Jkt 000000 PO 00000 Frm 00068 Fmt 6652 Sfmt 6201 C:\USERS\HWCHRI~1\APPDATA\ROAMING\SOFTQUAD\XMETAL\7.0\GEN\C\BRADTX~1.X
November 2, 2017 (10:46 a.m.)
G:\M\15\BRADTX\BRADTX_045.XML
g:\VHLC\110217\110217.061.xml (679209|10)
69
1 ‘‘(1) in the case of a qualifying child, $1,600,
2 and

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #339 on: November 10, 2017, 03:12:00 PM »
If anybody finds the full text to the Senate bill, please post a link.  (once again, the media reports are dumbed down for the 80%, so we get just enough info to make them worthless).  :{(

The only place I've seen it so far is here: http://thehill.com/policy/finance/359598-read-senate-gops-tax-bill

Thanks.  I just found the full .pdf link here:

https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman%27s%20Mark.pdf

I've just started reading through it.  12% and 22.5% brackets directly replace the 15% and 25% brackets for 2018 (same thresholds), so this is a definite gain for lower earners (after adjusting for lost deductions/exemptions).
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

FIREchiefsr

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Re: Republican Tax Plan 2017
« Reply #340 on: November 10, 2017, 04:12:10 PM »
Senate bill, MFJ.  New 25% bracket ranges from $120K all the way to $290K.  (the old 28% bracket was $156K to $238K)  This is encouraging for the middle class, and looks to be much more favorable than the house bill.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

Viking Thor

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Re: Republican Tax Plan 2017
« Reply #341 on: November 10, 2017, 04:18:59 PM »
People in high cola states will pay a lot more, myself among them. Where I live a regular 2000 square foot house is 18k year in property tax. Basically some republican congressmen in ny/nj/ca will throw their constituents under the bus and others will vote against.

The ones who throw their constituents under the bus probably have high paid consulting gigs lined up with republican think tanks or the Koch brothers if they lose and therefore willing to risk it and vote for a horrible deal for their district.

What is really frustrating is I am going to pay much more in tax so the Trump family and other rich will get a huge tax cut. I don't want to pay more tax but it would sting a lot less if it were going to poor people or to somehow benefit society.

Undecided

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Re: Republican Tax Plan 2017
« Reply #342 on: November 10, 2017, 05:00:45 PM »
thanks to @techacker980@gmail.com my credit score improved drastically. y'all should try him out.
he also hacks social networking apps of your patner to detect cheats

Tax cheats?
« Last Edit: November 10, 2017, 06:37:30 PM by Undecided »

frugalecon

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Re: Republican Tax Plan 2017
« Reply #343 on: November 11, 2017, 05:24:27 AM »
People in high cola states will pay a lot more, myself among them. Where I live a regular 2000 square foot house is 18k year in property tax. Basically some republican congressmen in ny/nj/ca will throw their constituents under the bus and others will vote against.

The ones who throw their constituents under the bus probably have high paid consulting gigs lined up with republican think tanks or the Koch brothers if they lose and therefore willing to risk it and vote for a horrible deal for their district.

What is really frustrating is I am going to pay much more in tax so the Trump family and other rich will get a huge tax cut. I don't want to pay more tax but it would sting a lot less if it were going to poor people or to somehow benefit society.

I had the same thoughts, VT. But I am guessing that people below us in the income distribution will also get screwed, because the resulting deficits will be used as a pretext for slashing programs that benefit them.

GoingConcern

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Re: Republican Tax Plan 2017
« Reply #344 on: November 11, 2017, 07:52:15 AM »
I'm all for simplifying the tax code, limiting itemized deductions and lowering corporate taxes (assuming corporate loopholes were also limited but the senate plan of territorial system is ludicrous.)   But repealing the estate tax, taxing PHD students (looks like senate will repeal this) and lowering taxes for the top .1% shouldn't be part of the plan.  In fact, I think there should be some sort of Buffet rule where the highest earners should pay a certain %.

Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.

In addition, some sort of spending reduction should be in place.  Start off with the military. 

sokoloff

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Re: Republican Tax Plan 2017
« Reply #345 on: November 11, 2017, 08:26:29 AM »
Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.
I'm assuming you mean "is" here.

GoingConcern

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Re: Republican Tax Plan 2017
« Reply #346 on: November 11, 2017, 08:29:27 AM »
Raising taxes on the upper-middle class Americans and decreasing taxes on the richest Americans to increase our national debt isn't counterproductive.
I'm assuming you mean "is" here.

Yep.

Rubyvroom

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Re: Republican Tax Plan 2017
« Reply #347 on: November 11, 2017, 08:38:48 AM »
On the bright side, at least they didn't follow their blueprint from the healthcare debate and also steal from the poor at the same time.  They seem to have learned how bad the optics were on their plan to end medicaid to fund tax breaks for the rich, so this new tax plan mostly ignores the poor and instead steals from the middle class to fund tax breaks for the rich.  I wouldn't exactly call that progress, though.

I haven't read through all pages of this post so apologies if this is duplicating info, but from a nonprofit perspective we are very worried about the impact on elderly individuals and the poor. Eliminating the medical expense deduction, eliminating private bond funding, changing charitable donations and eliminating tax exemptions for the development and preservation of affordable housing will have far-reaching impacts on the senior living sector, hospitals and health systems, colleges and universities and other nonprofit organizations that utilize tax-exempt financing. These provisions blindsided many nonprofits, as they were included with no previous public debate. Here is a quick snippet from LeadingAge that discusses the negative impacts

http://www.leadingage.org/legislation/leadingage-statement-proposed-tax-cuts-and-jobs-act

I haven't diligently read through amendments to the tax plan so perhaps some of these areas are being re-worked, but one real life example is something my organization is working on right now. A nursing home has been struggling with a poor Medicaid reimbursement system for years and reimbursement has not kept pace with increased wages for care staff. We are working to refinance their tax-exempt bonds because the rising costs of care have created a cash flow issue whereby they haven't been able to make their debt payments. We've been working for months with the trustee bondholders to renegotiate a tax-exempt bond deal at an interest rate that would guarantee this site would be sustainable into the future, while decreasing risk to bondholders. We are now under the gun to complete this financing before the end of the year, or a very real outcome could be that this nursing home would have to shut its doors. This nursing home is in a very small rural community and many of these people would have no where to go. Everyone involved in this case is working diligently to close the deal before the end of the year, and I imagine we're not the only ones facing this situation.

From a less critical standpoint, we own two assisted living buildings that were financed via tax-exempt bonds back in 2010. The optional redemption dates are in 2018 and because rates are more favorable today than in 2010, we likely would have refinanced next year leaving us more money to reinvest into care staff wages and an aging infrastructure. If this tax plan passes, it completely limits our ability to refinance these properties, meaning less money available to pursue our mission.

I agree that they have fixed the optics of harming the poor, but unfortunately, directly or indirectly, they are still harming the poor. Those of us in the nonprofit sector are quite concerned.

sokoloff

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Re: Republican Tax Plan 2017
« Reply #348 on: November 11, 2017, 08:46:55 AM »
It may actually pump up charitable contributions in the last 6 weeks of 2017, but I agree if this passes, I'd expect to see a marginal reduction in charitable giving.

For our own account, we are going to make some of what would have been our 2018 donations in 2017 just to hedge against the possibility that this will pass as-is. (That seems unlikely to me, but since we have the cash and hedging is very inexpensive, we might as well hedge.)

Rubyvroom

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Re: Republican Tax Plan 2017
« Reply #349 on: November 11, 2017, 08:53:02 AM »
It may actually pump up charitable contributions in the last 6 weeks of 2017, but I agree if this passes, I'd expect to see a marginal reduction in charitable giving.

For our own account, we are going to make some of what would have been our 2018 donations in 2017 just to hedge against the possibility that this will pass as-is. (That seems unlikely to me, but since we have the cash and hedging is very inexpensive, we might as well hedge.)

Yeah I've looked at that too actually (beefing up 2017 contributions), through the "Let's talk about DAFs" thread on here. I admit I was rather uneducated on the topic. Yet another thing I've learned from these forums :)