A Guide to the Tax Changes

[VacationForever]

Not really. In California, education costs are paid from state funds, while in many Eastern states, they are paid from a local school tax which is placed against property values, and is frequently MORE than either state income tax or other (usually county) property taxes, which pay for fire and police, road maintenance, jail, public welfare, possibly an airport, etc.

The state-funded education model was supposed to make public education more equal by providing the same number of dollars per student (although providing education has different costs in different localities). I used to live in New York, and have friends in New Jersey who report that a school budget usually has to be approved by voters, and that this is VERY difficult when school taxes on a $200,000 house might be $10,000. As I recall, if the voters won't pass the budget, then an "austerity" budget was imposed, which basically meant a very minimal school year without much in the way of enrichment or extracurriculars.

Neither system seems ideal to me, but the "Eastern" system seems a lot more stressful.

No so fast! California passed Mello-Roos taxes on properties many years ago, limiting to 1% of appraised property values in addition to the standing 1% property taxes. Mello-Roos tax is used to build or expand schools, and infrastructure. Most new developments make use of this and bump property taxes to about 2% at newly developed areas. The last house that I bought and sold was in a new development. We had Mello-Roos on everything - school district, fire department etc etc... If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos. Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.

 

[VacationForever]

"Obviously if a state had low sales tax, low income tax and low property taxes and great pensions we'd all move there..."

That sounds a lot like Florida, but don't move here.

"Most of the people who retire in Florida are wrinkled and they lean on a crutch.
And mobile homes are smotherin' my Keys. I hate those bastards so much."
-- Jimmy Buffett, "Migration" (1974)

.

Similarly here, while local sales tax is 8.25%, there is zero income tax, 0.5% property taxes, very low crime rate. Properties are all very new, developed in the past 20 to 30 years, each under a Master Plan and no traffic congestion. Pensions are associated with the employer so it is not unique to any state. Alot of "us" move here. Beautiful skyline, mountains and scenery. But please don't move here, it will jack up our prices. LOL

 

[klpca]

Similarly here, while local sales tax is 8.25%, zero income tax, 0.5% property taxes, very low crime rate. Properties are all very new, developed in the past 20 to 30 years, each under a Master Plan and no traffic congestion. Pensions are associated with the employer so it is not unique to any state. Alot of "us" move here. Beautiful skyline, mountains and scenery. But please don't move here, it will jack up our prices. LOL

Interesting - my cousin in Reno lives in an upscale area where they are having a terrible time with their local schools due to overcrowding. They tried to pass a bond to expand the local school, but it didn't pass. Her daughter's third grade class was set up in the library with a divider between the class and the stacks. They pulled their kids out and now send them to private school.

 

[klpca]

No so fast! California passed Mello-Roos taxes on property many years ago, limiting to 1% of appraised property values. Mello-Roos tax is used to build or exand schools, and infrastructure. Most new developments make use of this and bump property taxes to about 2% at newly developed areas. The last house that I bought and sold was in a new development. We had Mello-Roos on everything - school district, fire department etc etc... If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos. Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.

I never understand why people willingly buy in a Mello Roos district, but in our area it is new and shiny so people line up to buy. Drive 5 miles south, pay about half in property tax, and stay in the exact same school district.

 

[bluehende]

I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.

This really depends on where you live. On Long Island almost 80% of filers itemize and will lose in this tax bill. That is why Republican Peter King voted against it.

 

[VacationForever]

2 certainties in life, death and taxes.

 

[Conan]

This really depends on where you live. On Long Island almost 80% of filers itemize and will lose in this tax bill.

I was looking at my own taxes 2017 vs. 2018 (I live in high tax state).

With state and local taxes capped at $10,000 we'll be taking a standard deduction when it comes time to file for 2018. The standard deduction for married joint in 2018 is $24,000. So unless we give more than $14,000 to charity (and we don't) that's the way to go.

No alternative minimum tax either since they're raising the AMT exemption for marrieds from $84,500 to $109,400. (And the phaseout point where you begin to lose that AMT exemption moves from $160,900 to $1,000,000.)

 

[GetawaysRus]

I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.

You're right, Brian. But I suspect that many people who were able to afford a timeshare purchase have enough income that itemizing was beneficial.

Going forward, it looks like I will become one of the non-itemizers because of the loss of the state and local tax deduction. For me, the vast bulk of the dollars on Form A were the state and local taxes.

I just picked up TurboTax today at Costco (it's on sale now). I won't know for a few months (until I complete 2017 taxes), but it will be interesting to see what TurboTax recommends I do about paying 2018 estimated taxes. In other words, will the program be sophisticated enough to forecast what is going to happen to our tax bills going forward? Will it recommend that I pay the same amount as 2017 or make an adjustment for the new tax law?

 

[Conan]

The new law crushes two constituencies
1. High tax states because of the $10,000 ceiling (and if you're no longer itemizing the state tax deduction is functionally zero).
2. Charities because many potential givers will lose the incentive when they move over to the standard deduction.

 

[isisdave]

No so fast! California passed Mello-Roos taxes on properties many years ago, limiting to 1% of appraised property values in addition to the standing 1% property taxes. Mello-Roos tax is used to build or expand schools, and infrastructure. Most new developments make use of this and bump property taxes to about 2% at newly developed areas. The last house that I bought and sold was in a new development. We had Mello-Roos on everything - school district, fire department etc etc... If you live in an older area or a house that is rebuilt in an old area you will hardly see Mello-Roos. Even then, lawmakers love to put a new bond for school at local election time, which usually gets passed, adding to the property tax again.

Well ... sort of.

Mello Roos was more of a "deferred payment" plan. The developer got the locality to front the utility and street infrastructure, and then collect it back over typically 20 or 25 years. We had one when we bought this house in 1994, and it was paid back by about 2014. It was about $900 a year. This added about $18000 to our $218000 house, but looked to us like a very small second mortgage. And of course it was all disclosed and agreed to by us beforehand. This was a time when most of western Riverside county was being developed.

Since 1996, Mello Roos districts have required a 2/3 vote, and this has made it much harder to have one, unless you're developing on the edge of the desert and no one lives there yet. VF, was yours more recent than that?

 

[TUGBrian]

This really depends on where you live. On Long Island almost 80% of filers itemize and will lose in this tax bill. That is why Republican Peter King voted against it.

in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.

and more than 2 out of every 3 citizens who file taxes...use the standard deduction.

I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.

 

[VacationForever]

Well ... sort of.

Mello Roos was more of a "deferred payment" plan. The developer got the locality to front the utility and street infrastructure, and then collect it back over typically 20 or 25 years. We had one when we bought this house in 1994, and it was paid back by about 2014. It was about $900 a year. This added about $18000 to our $218000 house, but looked to us like a very small second mortgage. And of course it was all disclosed and agreed to by us beforehand. This was a time when most of western Riverside county was being developed.

Since 1996, Mello Roos districts have required a 2/3 vote, and this has made it much harder to have one, unless you're developing on the edge of the desert and no one lives there yet. VF, was yours more recent than that?

The development was started by 11 developers in the boonies in 2004 to 2008 in Northern California. The local school district Mello Roos was payable over 25 years starting at $1,500 per year, with a built-in guaranteed 5% increase every year. If you think timeshare MF increase is bad, this one was even worse. We bought our home in 2008 and sold in 2017. We had 3 to 4 Mello Roos, including fire department, police and other utilities. Essentially it added another 1%, making it 2% property tax each year. There is a little known fact that some of the Mello Roos can be pre-paid through a lump sum payment. We went ahead and paid off the most expensive Mello Roos which was the school district one. We paid 20K directly to the school district when we bought the house. Our buyers were very fortunate... It had gone to 2.4K per year for our neighbors on this one Mello Roos by the time we sold.

 

[Sugarcubesea]

So true... we meet so many people/retirees here in our development, they are mostly transplants from California and New York. Some even buy homes here and relocate their families while they still have businesses in New York. They simply fly back and forth through the year. I suspect that they do that to show residency here which means no taxes on their investments at the state level, while they still pay taxes for their income from California/New York. There is one family with a young boy and he goes to school here while his father has his business in New York. Again, with lower crime rate and a more pleasant environment, they feel that it is better to raise their son here.

The president of the company I work for made FL his state of residency and commutes back and forth to our company HQ. since he makes over $500K a year it saves him paying state taxes.

 

[VacationForever]

The president of the company I work for made FL his state of residency and commutes back and forth to our company HQ. since he makes over $500K a year it saves him paying state taxes.

If his job has to be done in your state, even though he commutes between the 2 states, I do not believe he gets a free ticket on his salary/compensation. State income tax laws are written to tax where the workplace is. He does get tax relief for his other investment income. However, if he owns the company, he may be able to set up a consultancy firm in Florida and contracts his services with his company's and that way his consultancy fees are "taxed" (no tax) in Florida.

 

[bluehende]

in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.

and more than 2 out of every 3 citizens who file taxes...use the standard deduction.

I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.

You said it yourself 1 in 3 itemize. I only used LI for an example. I feel this tax law unfairly singles out a few states to increase their taxes or at the least minimize their cut. The high tax states for years have paid more to the federal government than they get back. Low tax states get back more. The high tax states are also the high income states. Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle. They pay a much larger share of their income in taxes. Should there be a cost of living factor in taxes. There are many ways to look at taxation. None of them are fair in every ones eyes. In case you think I am talking my own book I do not live in a high tax state.

 

[TUGBrian]

vice versa, why should I have to pay more in federal income taxes because my state is better at managing its finances than those with extremely high state/local taxes that are able to be written off federal returns?

no change is ever going to make 100% of the people involved happy when you are talking hundreds of millions of folks...it quite simply isnt possible.

I agree completely that taxes should be "fair" across the board...but the problem is if you poll 300 million people asking them what is fair, you are likely to get 200 million different answers.

 

[WinniWoman]

in 49 of the 50 states, the majority of tax filers use the standard deduction and do not itemize.

and more than 2 out of every 3 citizens who file taxes...use the standard deduction.

I dont feel the tax code representing hundreds of millions of people should be the least bit concerned with the relatively speaking small population of folks who live on long island who itemize their taxes every year.

Which is why a flat tax would be best and then we really could just file on a postcard!

 

[WinniWoman]

You said it yourself 1 in 3 itemize. I only used LI for an example. I feel this tax law unfairly singles out a few states to increase their taxes or at the least minimize their cut. The high tax states for years have paid more to the federal government than they get back. Low tax states get back more. The high tax states are also the high income states. Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle. They pay a much larger share of their income in taxes. Should there be a cost of living factor in taxes. There are many ways to look at taxation. None of them are fair in every ones eyes. In case you think I am talking my own book I do not live in a high tax state.

Right. And just think of all the people in states like NY- the ones upstate- who do not live and work in NYC and have lower incomes and still have incredibly high taxes! Not everyone in New York has high incomes- in fact- most don't. Many are making low to mid 5 figure salaries and have high taxes and expenses.

I will add that high tax states like NY and California, however, are high production states as compared with many others and contribute to the coffers of the entire country.

 

[WinniWoman]

When I do my taxes, Tax Act calculates both itemizing and not itemizing to determine if I should take the standard deduction or itemize. It always goes with itemizing, and I don't even have many things to include- EXCEPT my hell hole high property and school taxes, the little property taxes from the timeshare maintenance fees, and charity. (I have no mortgage or home equity loans). Nothing else really to claim.

So that says it all.

 

[Roger830]

Why should someone in a state that it takes 65K to live nicely pay such a lower rate than the family in a high income high cost of living area that may take 150K to have the same lifestyle. They pay a much larger share of their income in taxes.

Next week I'll travel to Florida for 6 weeks.

I have a hard time finding meat in the supermarket for the price that I pay in Connecticut. Good housing, motor vehicles, gasoline, clothing, electronic products, are all the same price. The only thing noticeably higher in the north is taxes.

With the new tax law, the lower income folks in Florida will have a few more dollars to make those items more affordable.

 

[geekette]

How do we know for sure the ratio of itemizers? Someone said something, now it has been repeated, but I did not hear IRS give any stats whatsoever, so I doubt the idea that so few itemize. Those that do obviously have deductible expenses. Or used to. I'm not sure that it matters how many itemize in forming a tax policy, but I'd like the stat verified vs repeated without it.

I would prefer national sales tax vs income tax. Everyone pays when they buy something. We get visitor dollars that way, too, and US citizens doing jobs in other countries can keep their income. Hard to cheat, too.

I won't fully know until this time next year how I am impacted, but between mortgage and cancer, the dbl'ing of the std deduction doesn't cover it.

 

[bluehende]

Next week I'll travel to Florida for 6 weeks.

I have a hard time finding meat in the supermarket for the price that I pay in Connecticut. Good housing, motor vehicles, gasoline, clothing, electronic products, are all the same price. The only thing noticeably higher in the north is taxes.

With the new tax law, the lower income folks in Florida will have a few more dollars to make those items more affordable.

I just looked up the difference between Orlando and suburban NJ around NY. If you were making 50k in NJ you would only need 38K to live accordingly in Orlando. The difference seems to be real estate cost mostly. You cannot ship real estate from one place to the other like other goods. Here is the model that gives the costs used in the calculations.

https://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx

Tax policy has a lot of effect on our economy. A true discussion of this will get way too political. All I will say is that this bill has a lot more in it than a few dollars in someones pocket and the effects of these changes will go way beyond your paycheck for good or bad.

 

[ace2000]

I think its important to note that most things being argued (both for and against) are for those of us who itemize our returns, and ignores the fact that the overwhelming majority of tax filing american households do not itemize, and instead take the standard deduction each year.

Brian's point above is correct. Many are believing the mainstream media's narrative about the new tax law, and I see many of their talking points in the replies on this thread. Trust me folks, doubling your standard deduction will have a major effect on your taxes owed - and that change is not only going to benefit the wealthy. Also, just the simple change of doubling that standard deduction, is going to make the tax process simpler for those that used to itemize, and now won't have to (I will fall into that group). If anyone believes otherwise, please share some real sources, with some real facts, that prove your case. I won't be holding my breath waiting for all of your replies.

 

[Roger830]

I just looked up the difference between Orlando and suburban NJ around NY. If you were making 50k in NJ you would only need 38K to live accordingly in Orlando. The difference seems to be real estate cost mostly. You cannot ship real estate from one place to the other like other goods. Here is the model that gives the costs used in the calculations.

Real estate cost is a function of supply and demand.

It likely that because interest and property taxes were deductible, real estate prices were driven too high.

 

[Bailey#1]

All I can say is I hope this Tax Law works. To me it doesn't make sense that a Tax cut that adds 1.5 trillion to our debt is any good. All I see down the road is inflation going up, SSI and Medicare getting cut, house devaluations, and a more divided nation. But I been wrong before, and I hope I am wrong now.