Author Topic: Republican Tax Plan 2017  (Read 72135 times)

CCCA

  • Bristles
  • ***
  • Posts: 265
  • Location: Bay Area, California
  • born before the 80's
    • Our projects
Re: Republican Tax Plan 2017
« Reply #50 on: November 02, 2017, 02:06:32 PM »
Deductions have always come off at your marginal rate, right? I'm just confused, because a story on CNBC attempting to explain the winners and losers says that MFJ will pay 12% at incomes between 24k and 90k, which makes it sound like the opposite. Under the current rules, if the MFJ 12% bracket were set at 90k, then your real rates would be 0% on the first 24k, and 12% on every dollar earned from 24k to 114k (90+24). I'm guessing some writer/editor was just being too flippant about this, and I haven't read any of the actual bill, but wondering if anyone else noticed this, as it would be a rather large change.

Yes and for most of us Mustachians who max out our 401k its 12% up to $132k.


no this is incorrect.  It's $90k + $18k multiplied by the number of tax deferred accounts you have access to.  Personally we have access to 3, so it's 90k + 54k but for most i'll be $126k (for 2 401Ks).
Check out some of our projects.

and the Financial Freedom Calculator.

AdrianC

  • Pencil Stache
  • ****
  • Posts: 793
  • Location: Cincinnati
Re: Republican Tax Plan 2017
« Reply #51 on: November 02, 2017, 02:08:19 PM »
Personally will score big with the child tax credit.

You lose the exemption for everyone, though. It looks about a wash for our family of 5. The $24K standard deduction is no help.

ketchup

  • Magnum Stache
  • ******
  • Posts: 2867
  • Age: 26
Re: Republican Tax Plan 2017
« Reply #52 on: November 02, 2017, 02:14:25 PM »
Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected. Maybe not so - households with around 200K income usually rely heavily on mortgage and SALT deductions. With those gone, they will have to pay more. Seems fair. I know a number of people in this situation employed in finance, who buy 1.5MM apt, or pay 6K for rent, and can do that because they don't pay a lot of tax.
That makes sense then.  Keeping their actual overall tax pretty similar but make things actually "simpler."

Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more. I guess then, you will live it up in retirement and not leave nothing from your stash to your kids! True mustachian
First off, my vasectomy speaks to my kids-status, but even if I had kids, I wouldn't want to simply leave them a big pot of money.  A smaller pot, sure.  I'm not suggesting the estate tax should be 100%.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less. This is the best! This really benefits folks that dont need it.
Absolutely.
Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
I'd rather Harvard do other things with that money, but that's just me.

djadziadax

  • 5 O'Clock Shadow
  • *
  • Posts: 59
Re: Republican Tax Plan 2017
« Reply #53 on: November 02, 2017, 02:24:18 PM »
Fewer tax brackets makes the tax code "seem" simpler on the surface, but it doesn't really mean that much on its own.  Fine.  Less overall, saving the most for people at $200k+/yr.  As expected. Maybe not so - households with around 200K income usually rely heavily on mortgage and SALT deductions. With those gone, they will have to pay more. Seems fair. I know a number of people in this situation employed in finance, who buy 1.5MM apt, or pay 6K for rent, and can do that because they don't pay a lot of tax.
That makes sense then.  Keeping their actual overall tax pretty similar but make things actually "simpler."

Eliminating the estate tax is just dumb.  Less dynastic wealth would be better, not more. I guess then, you will live it up in retirement and not leave nothing from your stash to your kids! True mustachian
First off, my vasectomy speaks to my kids-status, but even if I had kids, I wouldn't want to simply leave them a big pot of money.  A smaller pot, sure.  I'm not suggesting the estate tax should be 100%.
Limit mortgage-deduction to 500k loans: sure - I'm generally opposed to this deduction anyway, and limiting this plus the larger standard deduction means it'll do less. This is the best! This really benefits folks that dont need it.
Absolutely.
Tax on private university endowments? No, that's dumb.  Education is already too expensive. Well, I think Harvard can spare 1.5% of its profits on the 20B in endowment they have. They have room for that.
I'd rather Harvard do other things with that money, but that's just me.
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.

jpdx

  • 5 O'Clock Shadow
  • *
  • Posts: 73
Re: Republican Tax Plan 2017
« Reply #54 on: November 02, 2017, 02:26:59 PM »
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.

Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now. Raising the deficit when the economy is nearly at capacity is risky because it could lead to higher inflation and higher interest rates. How would this effect your FIRE plans?

SuperSecretName

  • Stubble
  • **
  • Posts: 212
Re: Republican Tax Plan 2017
« Reply #55 on: November 02, 2017, 02:30:29 PM »
Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now.
get that common sense out of here.  no room for it.

dandarc

  • Magnum Stache
  • ******
  • Posts: 3007
  • Age: 35
Re: Republican Tax Plan 2017
« Reply #56 on: November 02, 2017, 02:31:49 PM »
Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now.
get that common sense out of here.  no room for it.
Economy is still IN RECESSION BECAUSE OBAMA!

djadziadax

  • 5 O'Clock Shadow
  • *
  • Posts: 59
Re: Republican Tax Plan 2017
« Reply #57 on: November 02, 2017, 02:32:10 PM »
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.

Deficit-financed tax cuts make sense in a recession when you need to stimulate the economy. They don't make sense right now. Raising the deficit when the economy is nearly at capacity is risky because it could lead to higher inflation and higher interest rates. How would this effect your FIRE plans?

Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.

Bird In Hand

  • Stubble
  • **
  • Posts: 140
Re: Republican Tax Plan 2017
« Reply #58 on: November 02, 2017, 02:36:23 PM »
Personally will score big with the child tax credit.

You lose the exemption for everyone, though. It looks about a wash for our family of 5. The $24K standard deduction is no help.

I was sure our family of 5 would get slammed with the new plan because 1) loss of personal exemptions (5x$4050=20250) and 2) our itemized deductions somewhat exceeded the standard deduction (~$15k last year).  Last year we had ~$35k tax free right off the top.  With the new plan it would be $24k.

But the lower tax rates + expanded Child Tax Credit and Family Tax Credit have us coming out about $4k ahead.  About $600 is that from lower tax rates, $3,000 from increased Child Tax Credit (thanks to the increased $230k income phaseout), and $600 from the new Family Tax Credit.  We'll lose ~$200 by having to rely on the Dependent Care Tax Credit vs the DCFSA.
"Overcoming the inertia of status quo since tomorrow"

Luck12

  • Bristles
  • ***
  • Posts: 284
Re: Republican Tax Plan 2017
« Reply #59 on: November 02, 2017, 02:40:27 PM »
Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.

Can't tell if serious.  If so, you have got to be kidding me.  GDP growth hasn't been over 5% (except once around 2000) in over 30 years.   

https://tradingeconomics.com/united-states/gdp-growth-annual

BTDretire

  • Handlebar Stache
  • *****
  • Posts: 1541
Re: Republican Tax Plan 2017
« Reply #60 on: November 02, 2017, 02:40:54 PM »
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.
Is that all, or do we need to add more, as in another $9 trillion+ like we had during the 8 years of Obama.
ie. this is just an additional $1.5 trillion because of the tax bill?

boarder42

  • Walrus Stache
  • *******
  • Posts: 6077
Re: Republican Tax Plan 2017
« Reply #61 on: November 02, 2017, 02:42:41 PM »
the people who lost under this plan are people who itemize if you didnt itemize before you likely came out far and away ahead.  its pretty simple the "simplified" the brackets and "simplified" the deductions.
My Miles Journal -Learn to Manufacture spend(MS)

Best super bonuses on Credit cards right now

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

djadziadax

  • 5 O'Clock Shadow
  • *
  • Posts: 59
Re: Republican Tax Plan 2017
« Reply #62 on: November 02, 2017, 02:59:53 PM »
Have you considered a GDP growth between 4.5%-6% in your equation on deficits? If you can run the numbers with that type of GPD growth, what does the deficit look like? Also, with the current administration aggressive stance on trade, that GDP growth can come from better trade outcome in addition to domestic production. So totally reasonable.

Can't tell if serious.  If so, you have got to be kidding me.  GDP growth hasn't been over 5% (except once around 2000) in over 30 years. 

Totally serious. Why would that be not possible given the current administration stance on trade and business? We have forgotten what it looks like but China has not. 

https://tradingeconomics.com/united-states/gdp-growth-annual

BTDretire

  • Handlebar Stache
  • *****
  • Posts: 1541
Re: Republican Tax Plan 2017
« Reply #63 on: November 02, 2017, 03:08:41 PM »
Quote
How will this (as currently proposed as it will certainly change) impact your FIRE plans?

 No effect on my Fire Plans, alreay FI.
How will it affect my taxes, I expect we'll pay more, at least until my wife quits working.
 On the other hand we paid less than 1% federal tax last year. (not including both sides of SS tax)
 I'm not seeing what we will loose except; an increase of my AGI off $4,900 because of the lost dependent deductions. Probably more than offset by an increase in the child tax credit, 2x $600= $1200. This is an additional $1200 tax CREDIT, that I will probably loose it two years.
 I did get a $3000 tax credit for college expenses, I don't see anything about that, just
the loss of student loan interest. There will be some cryers about that one!
 That $24,000 deduction may be additional incentive to get my wife to retire.
But, alas, the fat lady has not sung yet, so we really have no idea where we stand.

« Last Edit: November 02, 2017, 03:12:11 PM by BTDretire »

JSMustachian

  • 5 O'Clock Shadow
  • *
  • Posts: 27
Re: Republican Tax Plan 2017
« Reply #64 on: November 02, 2017, 03:36:44 PM »
If this plan passes will it change our taxes due April 2017 or not until April 2018?

dandarc

  • Magnum Stache
  • ******
  • Posts: 3007
  • Age: 35
Re: Republican Tax Plan 2017
« Reply #65 on: November 02, 2017, 03:40:50 PM »
If this plan passes will it change our taxes due April 2017 or not until April 2018?
Pretty much everything in the bill for individual taxpayers starts for the 2018 tax year.  For which you'd file by April 15th, 2019 (plus extensions, if you go that route).

sherr

  • Bristles
  • ***
  • Posts: 381
  • Age: 32
  • Location: North Carolina
Re: Republican Tax Plan 2017
« Reply #66 on: November 02, 2017, 03:42:13 PM »
There will be a lot of analysis about who wins and who loses under this tax plan. But in one way, we all lose: the 10-year cost of this plan is $1.5 trillion.
Is that all, or do we need to add more, as in another $9 trillion+ like we had during the 8 years of Obama.
ie. this is just an additional $1.5 trillion because of the tax bill?

$1.5 Trillion in addition to the current deficit. And that's using the "optimistic" Republican math that assumes it will power a strongly-growing economy. Even assuming that's true, the next time an economic downturn hits us (like the huge one Obama had to contend with) that number is going to skyrocket.

So, given the existing deficit and assuming the Republicans are 100% correct about their stronger economy estimates and that we never hit an economic downturn, we're looking at 0.44 (current deficit) * 10 years + 1.5 (new 10-year tax deficit) = $13.5 Trillion in new debt over a decade. Assuming everything is perfect.
« Last Edit: November 02, 2017, 03:48:18 PM by sherr »

Pylortes

  • Stubble
  • **
  • Posts: 159
Re: Republican Tax Plan 2017
« Reply #67 on: November 02, 2017, 03:47:51 PM »
This proposal looks pretty good to me overall.  Simplifies the tax code significantly, makes our corporate tax rate more competitive with the rest of the world (thus helping to keep companies from moving headquarters and jobs overseas), and offers a modest tax cut for most (hope not too much of the cut goes to the top income brackets though).   

I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.  I've also seen that the Dependent Care Flexible Spending Account is removed.   http://www.sacbee.com/news/politics-government/article182260906.html    The child tax credit phaseout going up from from $110k to $230k is nice however, along with the increase to $1,600/child.

Daisy

  • Handlebar Stache
  • *****
  • Posts: 1642
Re: Republican Tax Plan 2017
« Reply #68 on: November 02, 2017, 03:56:18 PM »
This plan will destroy my standard deduction games strategy I was going to start in FIRE.  See https://forum.mrmoneymustache.com/ask-a-mustachian/standard-deduction-games/.

Oh well, a higher standard deduction for someone with a paid off mortgage and using the Roth conversion strategy sounds pretty good to me. I do realize that the personal exemption is going away, but I still think with a $12k standard deduction, it will be hard to double up property tax and charitable donations to exceed this amount.

MDM

  • Walrus Stache
  • *******
  • Posts: 7221
Re: Republican Tax Plan 2017
« Reply #69 on: November 02, 2017, 04:06:01 PM »
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

The section below seems to cover it.

(b) APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS BRACKETS.—
 (1) IN GENERAL.—
 (A) 0-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1) is amended by striking
     ‘‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’’ in  subparagraph (B)(i) and inserting ‘‘below the 15-percent rate threshold’’.
 (B) 15-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1)(C)(ii)(I) is amended by striking ‘‘which would (without regard to this
 paragraph) be taxed at a rate below 39.6 percent’’ and inserting ‘‘below the 20-percent rate threshold’’.
 (2) RATE THRESHOLDS DEFINED.—Section 1(h) is amended by adding at the end the following new paragraph:
 ‘‘(12) RATE THRESHOLDS DEFINED.—For purposes of this subsection—
 ‘‘(A) 15-PERCENT RATE THRESHOLD.—
 The 15-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $77,200 (1⁄2 such amount
 in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in
 section 2(b)), $51,700,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), an
 amount equal to 1⁄2 of the amount in effect for the taxable year under clause (i), and
 ‘‘(iv) in the case of an estate or trust, $2,600.
 ‘‘(B) 20-PERCENT RATE THRESHOLD.—
 The 20-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $479,000 (1⁄2 such amount in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in 3 section 2(b)), $452,400,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), $425,800, and
 ‘‘(iv) in the case of an estate or trust, $12,700.

TexasRunner

  • Bristles
  • ***
  • Posts: 463
  • Location: Somewhere in Tejas
Re: Republican Tax Plan 2017
« Reply #70 on: November 02, 2017, 04:27:27 PM »
The 429 page bill is attached if anyone else cares for more details.

THANK YOU!

The online host has been locked down / crashing all day.  Hadn't been able to download it myself.
"The mathematical formula for the number of motorcycles you need is   x+1, where x is the number of motorcycles you currently have."

sokoloff

  • Pencil Stache
  • ****
  • Posts: 828
Re: Republican Tax Plan 2017
« Reply #71 on: November 02, 2017, 04:31:32 PM »
Create a tax on large private university endowments: Private universities with assets of more than $100,000 per student will pay a 1.4% excise tax on their net investment income. Possibly disagree. This may really make it harder for private universities to offer good scholarships.
That is an excellent point. I was supportive of the idea when I first heard about it, but your argument is entirely compelling to me.

sokoloff

  • Pencil Stache
  • ****
  • Posts: 828
Re: Republican Tax Plan 2017
« Reply #72 on: November 02, 2017, 04:37:22 PM »
So, the net effect is to make buying much less attractive, which lowers my expectation on house value appreciation, which makes buying even less attractive.  Maybe we continue to rent if this passes or buy only if the perfect option comes along.
If it similarly affects the thinking of those competing with you for those same properties, it will serve to reduce the current value of homes as well, which would be good for prospective buyers.

If landlord interest remains uncapped as I assume it will (as it's on schedule E), that will shift a little more purchasing power towards landlords and away from private buyers.

CCCA

  • Bristles
  • ***
  • Posts: 265
  • Location: Bay Area, California
  • born before the 80's
    • Our projects
Re: Republican Tax Plan 2017
« Reply #73 on: November 02, 2017, 05:06:02 PM »
has anyone seen info on capital gains rates?  I'm searching but not finding any info.  Wondering if they are keeping the low rates 15% and 0% for long-term gains.

The section below seems to cover it.

(b) APPLICATION OF CURRENT INCOME TAX BRACKETS TO CAPITAL GAINS BRACKETS.—
 (1) IN GENERAL.—
 (A) 0-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1) is amended by striking
     ‘‘which would (without regard to this paragraph) be taxed at a rate below 25 percent’’ in  subparagraph (B)(i) and inserting ‘‘below the 15-percent rate threshold’’.
 (B) 15-PERCENT CAPITAL GAINS BRACKET.—Section 1(h)(1)(C)(ii)(I) is amended by striking ‘‘which would (without regard to this
 paragraph) be taxed at a rate below 39.6 percent’’ and inserting ‘‘below the 20-percent rate threshold’’.
 (2) RATE THRESHOLDS DEFINED.—Section 1(h) is amended by adding at the end the following new paragraph:
 ‘‘(12) RATE THRESHOLDS DEFINED.—For purposes of this subsection—
 ‘‘(A) 15-PERCENT RATE THRESHOLD.—
 The 15-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $77,200 (1⁄2 such amount
 in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in
 section 2(b)), $51,700,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), an
 amount equal to 1⁄2 of the amount in effect for the taxable year under clause (i), and
 ‘‘(iv) in the case of an estate or trust, $2,600.
 ‘‘(B) 20-PERCENT RATE THRESHOLD.—
 The 20-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $479,000 (1⁄2 such amount in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in 3 section 2(b)), $452,400,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), $425,800, and
 ‘‘(iv) in the case of an estate or trust, $12,700.


Thanks for quoting this although the language is very confusing and I'm not following it very well. 
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   
Check out some of our projects.

and the Financial Freedom Calculator.

TexasRunner

  • Bristles
  • ***
  • Posts: 463
  • Location: Somewhere in Tejas
Re: Republican Tax Plan 2017
« Reply #74 on: November 02, 2017, 05:09:59 PM »
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   

So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.

:)
"The mathematical formula for the number of motorcycles you need is   x+1, where x is the number of motorcycles you currently have."

boarder42

  • Walrus Stache
  • *******
  • Posts: 6077
Re: Republican Tax Plan 2017
« Reply #75 on: November 02, 2017, 05:37:38 PM »
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   

So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.

:)

No it's total agi under that number. This didn't change from how ltcgs we're taxed before.
My Miles Journal -Learn to Manufacture spend(MS)

Best super bonuses on Credit cards right now

1. Delta Gold 60k miles Ends 1/31/2018
2. Delta Platinum - 70k miles - Ends 1/31/2018

Delta Business Gold - Ends 1/31/2018

Join Personal Capital - We each get 20 bucks!!
 https://www.talkable.com/x/StjGrn

MDM

  • Walrus Stache
  • *******
  • Posts: 7221
Re: Republican Tax Plan 2017
« Reply #76 on: November 02, 2017, 05:51:13 PM »
Thanks for quoting this although the language is very confusing and I'm not following it very well. 
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   
So am I understanding it correctly that under ~30k a year capital gains is taxed at 0%?....

Isn't that HUGE for an early retiree?  It seems if you can be confident in that situation remaining a reality, taxable accounts are MUCH more attractive if you can live below the 0% mark.  Essentially every account is a tax free account if you don't take very much out each year.

Its completely doable for many on here to live @ 20-30k per year.  Now that should be possible with a taxable account and avoid paying any taxes.

This will make the fire simulations regarding tax-advantaged accounts very interesting for low cost of living FIRE-ees.
No it's total agi under that number. This didn't change from how ltcgs we're taxed before.
At a quick glance, LTCG taxation is essentially unchanged from current law, in the sense that the taxable income step changes occur at ~"the same dollar amounts in 2017, plus inflation."  They no longer correspond exactly with the ordinary income bracket amounts, but it seems pretty much a "no change" thing.

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.

Slow2FIRE

  • Stubble
  • **
  • Posts: 127
Re: Republican Tax Plan 2017
« Reply #77 on: November 02, 2017, 05:51:58 PM »

... ‘‘(B) 20-PERCENT RATE THRESHOLD.—
 The 20-percent rate threshold shall be—
 ‘‘(i) in the case of a joint return or surviving spouse, $479,000 (1⁄2 such amount in the case of a married individual filing a separate return),
 ‘‘(ii) in the case of an individual who is the head of a household (as defined in 3 section 2(b)), $452,400,
 ‘‘(iii) in the case of any other individual (other than an estate or trust), $425,800, and
 ‘‘(iv) in the case of an estate or trust, $12,700.


Thanks for quoting this although the language is very confusing and I'm not following it very well. 
THis is my best guess:
That a 0% LTCG bracket does exist, but it has a lower income threshold for qualifying (below the 15% rate threshold) which is MFJ $77.2k or $51.7K individual, rather than the old 10 and 15% tax brackets and lower than the MFJ upper income limit on the 12% tax bracket. 
 
The 15% LTCG bracket is now for those in higher tax brackets but lower than the top one (39.6%), which is 20% rate.   

I believe the 20% LTCG bracket is essentially unchanged from the existing law.

Slow2FIRE

  • Stubble
  • **
  • Posts: 127
Re: Republican Tax Plan 2017
« Reply #78 on: November 02, 2017, 05:55:28 PM »
I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.

I feel that the estate tax should be repealed and at the same time the step up in basis should be eliminated.  The repeal of the estate tax is often done under the guise of "keeping family businesses in the family" so lets remove the step up in basis and remove the incentive for someone to begin selling assets as soon as said assets are passed on to them.

neverrun

  • Bristles
  • ***
  • Posts: 355
  • Location: Midwest
Re: Republican Tax Plan 2017
« Reply #79 on: November 02, 2017, 05:56:04 PM »
What I don't get is why Property taxes are "OK" but not state and local income taxes, why not just limit all of them to the up to $10,000.  Oh it's because this way states with income taxes are hurt but Texas residents still get theirs.

Peter Parker

  • Stubble
  • **
  • Posts: 165
Re: Republican Tax Plan 2017
« Reply #80 on: November 02, 2017, 06:44:26 PM »
This tax plan is a shell game.  It is just shifting tax burdens by slightly reducing personal rates while eliminating many deductions for wage earners.  Only corporations will see any signficant reductions.  And, as far as I can tell, there is no cuts in government spending--and they are suggesting it will be deficit nuetral because of it's effect on the economy.  I don't buy it.

As best I can I have tried to estimate my taxes under this plan, and I believe my taxes will go up.  They would have been through the roof had they done away with the deferred comp deductions. 

sokoloff

  • Pencil Stache
  • ****
  • Posts: 828
Re: Republican Tax Plan 2017
« Reply #81 on: November 02, 2017, 07:19:31 PM »
Doing some quick and dirty math backed up with a scenario tested in calcxml.com online tools entering my 2016 actual return figures vs what I project they would look like under this plan in 2018 [assuming same income, just different treatment for some items], it looks like we get crushed by this plan by about +$24K/yr in federal taxes, as the lowered top marginal rate doesn't come close to offsetting the loss of state income tax deduction for us and the loss of a few thousand in property tax deduction (if capped at $10K).

Mariposa

  • Stubble
  • **
  • Posts: 169
  • Location: NYC
Re: Republican Tax Plan 2017
« Reply #82 on: November 02, 2017, 07:35:19 PM »
^^^You must make some salary to take that kind of hit under the proposed plan. It does seem to disproportionately take from higher earners in high-tax states.

My back of the envelope calculations show we would be paying $2850 more under the House plan.

1. Our itemized deductions + exemptions are currently 46k. We would take the standard 24k exemption under the new plan. The difference is somewhat offset by the Child Tax Credit, Family Tax Credit, and lower tax brackets, but not quite. +$1350.

2. The loss of the DCFSA is a surprisingly big hit. We are getting a $2100 tax break for this [(7% FICA + 25% Federal + 10% Local) x $5000] = $2100. The Dependent Care Tax Credit would only give us a $600 tax break with one child in daycare (20% x $3000). +$1500.

sokoloff

  • Pencil Stache
  • ****
  • Posts: 828
Re: Republican Tax Plan 2017
« Reply #83 on: November 02, 2017, 07:48:22 PM »
It does seem to disproportionately take from higher earners in high-tax states.
Reasonably high W-2 income, but what really kills us with the new House proposal is the loss of deduction of 12% short-term capital gains tax the state imposes.

This plan doesn't look like much of a giveaway to this high earner. (It might be to the truly wealthy.)

Laura33

  • Handlebar Stache
  • *****
  • Posts: 1538
  • Location: Mid-Atlantic
Re: Republican Tax Plan 2017
« Reply #84 on: November 02, 2017, 07:49:34 PM »
I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.

I feel that the estate tax should be repealed and at the same time the step up in basis should be eliminated.  The repeal of the estate tax is often done under the guise of "keeping family businesses in the family" so lets remove the step up in basis and remove the incentive for someone to begin selling assets as soon as said assets are passed on to them.

How is this an incentive to sell?  You get the step-up in basis as of the date you inherit.  You keep that step-up regardless of whether you sell immediately or continue to maintain the investment. 

Removing the step-up basis and the estate tax would hurt those with less to pass on, and benefit those with the most.

For most people in the MC/UMC range, their biggest asset is their home, and maybe some stock/index fund investments.  They have zero chance of reaching the estate tax thresholds.  But they can pass on say $200K in equity and $50K in investments to their heirs, and their heirs get $250K.  Remove the step-up in basis, and the heirs get to pay CG tax on all of the gains in that $250K since however long ago they were purchased (and God forbid if the dead guy didn't keep perfect records of when everything was bought and you can't prove the original basis).

OTOH, someone with say $10M to pass on no longer has to pay @$2M+ in estate taxes (or pay lots and lots of cash to lawyers to set up trusts to avoid it).  That's a pretty big benefit that is likely going to outweigh the loss of the step-up in basis.

The part that worries me the most is the loss of the tax credit for keeping manufacturing in the US.  We are already at a disadvantage to many foreign competitors who have incredibly cheap labor and no environmental/safety protections.  Given all of the talk about keeping manufacturing jobs in the US and excoriating those who offshore, I am frankly stunned that this is on the chopping block.  I also don't like the loss of the dependent care account, given that the alternative child tax credits phase out.  But the $200K+ income threshold is a reasonable threshold for that (although it once again clearly targets those dual-income professional couples in HCOLA areas, a/k/a the blue states).

Other than that, it all seems like a shell game -- give here, take there, so that we can brag about simplifying and cutting tax rates while hiding the actual cost to most folks until it's too late.  Personally, I will probably be just fine -- we get to keep our 401(k)s and profit-sharing; we don't have student loans and this is my last year with the dependent care account anyway; we have a 15-yr mortgage and our interest deductions are low and getting lower; our property taxes aren't huge; and all in all I bet if we cut our charitable contributions, the new standard deduction will work just fine (and the lower tax rates will probably offset any difference).  Plus I'm a lawyer, so if we can figure out this new pass-through entity rule and take advantage of it, I will make out like a freaking bandit.

All of which is wrong IMO.  People like me don't need big-ass tax breaks (not to mention incentives to cut charitable giving); we're doing just fine as is.
Laugh while you can, monkey-boy

Romag

  • 5 O'Clock Shadow
  • *
  • Posts: 58
Re: Republican Tax Plan 2017
« Reply #85 on: November 02, 2017, 07:54:47 PM »
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.

Peter Parker

  • Stubble
  • **
  • Posts: 165
Re: Republican Tax Plan 2017
« Reply #86 on: November 02, 2017, 08:00:37 PM »
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Amen to that.

teen persuasion

  • Pencil Stache
  • ****
  • Posts: 978
Re: Republican Tax Plan 2017
« Reply #87 on: November 02, 2017, 08:03:33 PM »
Other notes from my first glance at the first 150 pages:

1- Page 127/128 discusses HSAs and makes me think that deduction may be going away, confusing read though.

2- Definition of personal residence moved from 2 years to 5 years living in the house. Tax on sale of residence will be more common as a result.

3- Dependent care benefits may be going away, again it's a confusing read though.


I can't imagine HSAs going anywhere, that's a huge GOP healthcare 'solution.'

Is that the Dependent Care Tax Credit or the DCFSA, or both?
According to the summary here: https://waysandmeansforms.house.gov/uploadedfiles/tax_cuts_and_jobs_act_section_by_section_hr1.pdf

That part of the bill makes Archer MSAs non-deductible.  This is to push more money into HSAs.
Thanks for the link, I was having trouble interpreting the MSA/HSA parts.

Looking further, I see that only $1k of the CTC is refundable, and none of the $300 other dependent/family credits.  Not as useful to us as at first glance. 

I see that they are rolling all the college credits into the AOTC, and making it extend to a 5th year at half amount.  No more LLC (which you could use beyond undergrad, I believe).  No exemption for savings bond interest used for college expenses.  No exemption for employer paid tuition.

It'll take some thinking to evaluate how this will possibly affect our taxes/options in FIRE a few years from now, especially w/ DS5 and college aid/expenses.

MDM

  • Walrus Stache
  • *******
  • Posts: 7221
Re: Republican Tax Plan 2017
« Reply #88 on: November 02, 2017, 08:07:04 PM »
Somewhat surprised that eliminating the medical expense deduction hasn't received more press. 

Not surprised that it leads AARP's objections.

But who knows what the final result will be...?

JLee

  • Magnum Stache
  • ******
  • Posts: 4108
Re: Republican Tax Plan 2017
« Reply #89 on: November 02, 2017, 08:07:27 PM »
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.

*ding*

The GOP doesn't care about pissing off the blue states, though.

A modest house in NJ is ~4 years away from matching/exceeding the $10k property tax limit, and we also have the 5th highest state income taxes in the country.
« Last Edit: November 02, 2017, 08:10:47 PM by JLee »

Romag

  • 5 O'Clock Shadow
  • *
  • Posts: 58
Re: Republican Tax Plan 2017
« Reply #90 on: November 02, 2017, 08:13:58 PM »
I am strongly opposed to repealing the estate tax fully, but open to reasonable modification to the caps and rates. We are heading towards unsustainable wealth inequality in my opinion.

Also it should be noted (as I understand it - willing to being schooled on this...) that high-tax states such as NY, NJ and CA receive less federal support than they contribute in federal taxes, so other states are not subsidizing them despite the current SALT deductions. They are supporting many low tax states with their federal taxes.

*ding*

The GOP doesn't care about pissing off the blue states, though.

A modest house in NJ is ~4 years away from matching/exceeding the $10k property tax limit, and we also have the 5th highest state income taxes in the country.

Yeah, I have not seen anyone hit on this fact in the news. Would expect blue state GOPers to get this out there.

badger1988

  • 5 O'Clock Shadow
  • *
  • Posts: 39
  • Age: 29
Re: Republican Tax Plan 2017
« Reply #91 on: November 02, 2017, 08:42:41 PM »
Ran the numbers...I save $6.45 with this proposal!

EscapeVelocity2020

  • Handlebar Stache
  • *****
  • Posts: 1521
  • Age: 44
  • Location: Houston
    • EscapeVelocity2020
Re: Republican Tax Plan 2017
« Reply #92 on: November 02, 2017, 09:31:49 PM »
Certainly not the immediate windfall Trump had led us mid and upper-classers to hope for!  But in the long run, it's potentially a huge boon to my heirs.  I like the idea of simplification, but I use software so the arms race is mostly moot.  Adding to the deficit during boom times is disconcerting, I applaud GOP reps that stand up for fiscal discipline as opposed to party line populism.  It seems like anything will fly if it comes down to 'party lines', but national debt is real and it's never going to be a better time to turn the Titanic around, or at least symbolically balance the budget.  Continuing the metaphor, it's like Cpt. Trump is steering us toward the iceberg because, hey, we're the Titanic baby!  Turn up the music and break out the bubbly :)
Transitioning to FIRE'd albeit somewhat cautiously...

FIREchiefsr

  • 5 O'Clock Shadow
  • *
  • Posts: 87
Re: Republican Tax Plan 2017
« Reply #93 on: November 02, 2017, 09:37:17 PM »
A lot of great info in this thread.  After struggling with about a half dozen internet articles, I also found the full bill text this afternoon and have read/skimmed through all sections regarding individual income taxes.  A few things:

a) It appears that the current itemized deduction phase out remains unchanged.  In some situations, this will make it even more unlikely that a person will benefit from itemizing.

b) I saw no mention of personal property taxes (i.e. unrelated to real estate, such as car registration based upon vehicle value).  I'm guessing that remains as  part of the overall "property tax" realm.

c) I agree that the medical expense elimination hasn't received much coverage.  This will remove one key incentive for people NOT to Roth convert substantially all of their tIRA monies.

d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

sol

  • Walrus Stache
  • *******
  • Posts: 5737
  • Age: 40
  • Location: Pacific Northwest
Re: Republican Tax Plan 2017
« Reply #94 on: November 02, 2017, 09:43:26 PM »
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.


FIREchiefsr

  • 5 O'Clock Shadow
  • *
  • Posts: 87
Re: Republican Tax Plan 2017
« Reply #95 on: November 02, 2017, 09:45:29 PM »
It seems like anything will fly if it comes down to 'party lines', but national debt is real and it's never going to be a better time to turn the Titanic around, or at least symbolically balance the budget.  Continuing the metaphor, it's like Cpt. Trump is steering us toward the iceberg because, hey, we're the Titanic baby!  Turn up the music and break out the bubbly :)

Didn't you see the movie?  IIRC, the first class passengers had no problem finding space in the life boats.  Of course, unlike the movie, I don't see this Captain going down with the ship.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

TVRodriguez

  • Bristles
  • ***
  • Posts: 251
Re: Republican Tax Plan 2017
« Reply #96 on: November 02, 2017, 10:01:30 PM »
I would like to see the estate tax repeal removed however.  I think keeping the estate tax but indexing for inflation would be appropriate.

Under current law, the estate tax is already indexed for inflation and affects a tiny number of people.

The idea of removing the step up is an administrative nightmare.

alexpkeaton

  • Stubble
  • **
  • Posts: 154
  • Age: 38
  • Location: NYC
Re: Republican Tax Plan 2017
« Reply #97 on: November 02, 2017, 10:20:48 PM »
Haven't run the numbers yet, but seems like it'll be "meh". Yeah, we get hosed in the Northeast by losing SALT deductions, except those huge SALT deductions subject high-earners like myself to AMT which disallows the SALT deductions anyway. (Or phases them out? I forget.) So I'll still have a huge tax bill, but perhaps a simpler one. Really not even sure if it'll be worth it to itemize anymore, whereas before I easily blew past the standard deduction a few times over.
« Last Edit: November 02, 2017, 10:22:43 PM by alexpkeaton »

Daisy

  • Handlebar Stache
  • *****
  • Posts: 1642
Re: Republican Tax Plan 2017
« Reply #98 on: November 02, 2017, 10:26:36 PM »
d) If this passes by mid December, I would expect major charities (especially DAFs) to be flooded with donations.  I wouldn't wait until December to open that DAF, as the custodians are swamped at year end even during "normal" years.  I wish they had changed it so that QCD's could be used to fund DAFs.

My wife and I have already discussed moving all of our planned lifetime charitable donations into the next eight weeks(!), in order to get the tax benefit of making deductible contributions to a DAF.  Next year and every year after, there would be no tax incentive for charitable giving, or at the very least a lot less benefit because your first $24k of giving each year would not be tax deductible.

I may go this route too. I don't know quite enough about Donor Advised Funds. The little I read, it made it seem like Vanguard would choose the charities the money goes to? This can't be right. I only skimmed over it during my last working days a month ago and now that I am FIREd I should look at this before the end of the year.

It would be a good time for me to do it this year as well, as I have more taxable income this year due to working most of the year, rather than the next few years while FIREd. I could get a big tax break on this for this year.

Can someone give a quick tutorial on DAFs? I thought it would work that I would put money in a DAF and then I could choose which charities the money would go to.

maizeman

  • Handlebar Stache
  • *****
  • Posts: 1648
  • Location: The World of Tomorrow
Re: Republican Tax Plan 2017
« Reply #99 on: November 02, 2017, 10:34:56 PM »
(and God forbid if the dead guy didn't keep perfect records of when everything was bought and you can't prove the original basis).

I've always assumed this was the reason for the basis step-up on death, rather than representing any form of intentional tax break.
"It’s a selective retirement," Richard explained, "a retirement from boring s**t."

My source code & my journal