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A Guide to the Tax Changes

lizap

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It is sad. Whether one has savings or not is dependent on so many factors, opportunities to make more money than from hand to mouth, life's fortunes/mis-fortunes, wisdom, inherently a saver or a spender...

I did lose alot of money in the 2000 dot.com cash, so much that it is embarrassing, with something called margin loans. I recovered and never gambled again. I told my financial advisor the story and I said easy come easy go as I used to make a lot of money. He cringed and said I could have been retired a long time ago.. I hunkered down, kept working and while I am not rich, here I am and retired. So when I said I am terrified of debt, that is from real scars.

We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.
 

VacationForever

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We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.
Parents usually want the best for their children and please do not look at it as a mistake. Most of us want the best for our children and provide them the opportunities with what our resources will allow. Everyone has a core in them and we really do not know what it is until they are older. I often say having children is a gamble, you never know what they will be at birth and when they grow up.
 

klpca

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It is interesting reading these stories. I don't feel so alone.:D Although my kids are working, two are seriously considering career changes and the other one certainly isn't making the big bucks. I'm not ok with a job you love, it should be the job with the highest salary. Bonus points if you love it. My kids are kind of idealistic, as are my husband and my in laws. Obviously I'm very pragmatic. Btw, two are prolific savers so that's good. We aren't supporting anyone financially, but I can't see anyone being able to buy a house here. I'm secretly hoping that the tax bill will cause real estate prices to drop in CA, lol.
 

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Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web? This calculator below is simple and takes your state of residence into consideration:

http://taxplancalculator.com/

According to that one, even though my taxable income will increase by ~$13K, my tax bill will decrease by ~$4K, and will switch from itemizing to using the standard deduction. It is interesting seeing how changing the state affects the outcome.

Kurt
 
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klpca

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Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web? This calculator below is simple and takes your state of residence into consideration:

http://taxplancalculator.com/

According to that one, even though my taxable income will increase by ~$13K, my tax bill will decrease by ~$4K, and will switch from itemizing to using the standard deduction. It is interesting seeing how changing the state affects the outcome.

Kurt
It was very interesting to play with the numbers. Some unexpected results at the higher ranges, but there is probably some interplay with the AMT, so it may not be quite as easy to determine the real number. We will probably be using the standard deduction as well. Kind of glad to not worry about substantiating deductions - especially charitable contributions. It will also allow the IRS to limit their audit focus.
 

rapmarks

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Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web? This calculator below is simple and takes your state of residence into consideration:

http://taxplancalculator.com/

According to that one, even though my taxable income will increase by ~$13K, my tax bill will decrease by ~$4K, and will switch from itemizing to using the standard deduction. It is interesting seeing how changing the state affects the outcome.

Kurt
It looks like I will save a real bundle, hope it is accurate
 

bobpark56

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I think we will view the incentive differently. Is the incentive for high tax states to lower their level of taxes? Wouldn't this hurt their economies as the services deteriorate and people and companies flee for this reason. Then the only alternative would be to rely on the federal government like all the other states.

I will use my state as an example. DE gets the lowest percentage of any state of their budget from the federal government. For us to get to the average we would need almost 20% of our budget in additional money from the federal government. So if we bring our taxes in line would you like the Federal Government to give us 500 million dollars a year. That is what it would take and we are a state of only 1 million. Imagine if CA or NY demanded the same.
Hmmmm....Some states seem to be keeping their expenditures at manageable levels. Why is it Delaware can't do likewise? And NJ, NY, & Cal? Are these states simply too wedded to the idea that providing personal benefits is better than providing the basics of roads, schools, bridges, etc.?
 

bluehende

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I think the biggest change especially for high earners. is the bracket change (maybe upward creep of brackets is better term). Here is a good comparison of old vs new

https://www.factcheck.org/2017/12/guide-tax-changes/

Both of my kids are saving considerable. They live in higher tax states but not much beyond the limits. The original elimination of salt would have hurt them a lot. With the limits it hurts a little. They both fall under being hurt by the most visible changes. They gain a lot by the bracket changes. I think the 15% that will not get a tax break fall under specific scenarios unique to a few percent of tax payers. The one I have heard about was the head of household break. Specifically single parents with kids in low incomes get hurt.
 

bobpark56

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The high tax states CA,NY, and NJ do not get back as much per dollar on their tax dollars than the low tax states. I do not live in a high tax state but that seems unfair also. They would argue that they pay more than their fair share.
Ahhh...But that's not a tax issue. It's a federal spending issue.
 

bobpark56

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2 certainties in life, death and taxes.
Not necessarily true. We just completed a 2-week stay in Merida, Mexico. While there, we learned that not paying personal income taxes is not illegal. This seems to be the safety valve for indigenous rural families who live off the land and for those elsewhere who individually provide service functions, etc. If you work for a business (not sure where the boundaries are here), the business is required to pay taxes on what they pay you.
 

bluehende

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Hmmmm....Some states seem to be keeping their expenditures at manageable levels. Why is it Delaware can't do likewise? And NJ, NY, & Cal? Are these states simply too wedded to the idea that providing personal benefits is better than providing the basics of roads, schools, bridges, etc.?

I think you misunderstand. I never said our budget was particularly high. I am saying we get less of it from the federal government. Delaware gets 31 cents back for every dollar we pay in federal taxes. West Virginia gets 1.40. Why doesn't the low tax state of WV get their act together and stop stealing (hyperbole not my actual opinion) Delawares money. I never said personal benefits. I did specifically surmise (opinion not fact) that they provide services that add to their GDP. It could even be personal benefits. If so then the high tax states should just have the feds pay for it like the rest of the states. My high tax state does not get any particular perks that my family in WV does not gets. In fact they seem to get more.

Can you site anything that says lower tax states manage their costs better? It would be great if NY could pay AL wages but they cann't.
 
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bluehende

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Ahhh...But that's not a tax issue. It's a federal spending issue.

So you are saying that the Federal Government should be spending a lot more in NJ,NY,and CA so they are not cheated?
 

CalGalTraveler

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The notion of "low tax states" may possibly be a misnomer as the end of the article below states that 22 states get taxes for public funding of schools etc. from charitable write-offs (shifts the spend from "personal income tax" to "charity.") - it's a shell game - everybody pays a lot of taxes to their state but it is classified in different categories.

The interesting idea here is if the big states move to such a scheme and the IRS fights it, the "sacred cows" of school vouchers and conservation easements which are protected by this loophole in the charitable giving by 22 other states by precedent of law would also have to be thrown out as well.

https://www.usatoday.com/story/news...tax-states-consider-charity-worka/1003733001/
 
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isisdave

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Several here have been speculating how the tax bill will affect their taxes for this year, but have any plugged numbers into some of the calculators on the web? This calculator below is simple and takes your state of residence into consideration:

http://taxplancalculator.com/

Kurt

Note the info circle next to the Income box - you need to use the Adjusted Gross Income. The author has been tweaking this site since the bill passed, and I think it's gotten more accurate and covered more cases. I believe it has underestimated our State Tax deduction -- it only added $1100 to the property tax number we supplied -- but it doesn't matter as we're now clearly in the Standard Deduction camp.

That made me wonder -- does it assume states will adopt the same standard deduction? Not gonna happen in CA -- maybe that's why the SALT was so low. Some states assess state tax (or at least start) as a percentage of federal tax ... are they going to continue with that?
 

PigsDad

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It was very interesting to play with the numbers. Some unexpected results at the higher ranges, but there is probably some interplay with the AMT, so it may not be quite as easy to determine the real number. We will probably be using the standard deduction as well. Kind of glad to not worry about substantiating deductions - especially charitable contributions. It will also allow the IRS to limit their audit focus.
Indeed, it was interesting. Seeing the breakdown of the old tax brackets (and total tax based on each of those brackets) compared to the new brackets was very enlightening. We will see if assumptions the calculator makes are accurate.

Taking the standard deduction will be nice, especially if we know we for sure would be better off with it vs. itemizing. I always hate putting together and organizing all of the little deductions (auto registration tax, timeshare property taxes, miscellaneous charitable contributions, etc.). It will take some getting used to (have been itemizing for almost all my working life), but it should make getting ready for taxes easier.

Kurt
 

klpca

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Indeed, it was interesting. Seeing the breakdown of the old tax brackets (and total tax based on each of those brackets) compared to the new brackets was very enlightening. We will see if assumptions the calculator makes are accurate.

Taking the standard deduction will be nice, especially if we know we for sure would be better off with it vs. itemizing. I always hate putting together and organizing all of the little deductions (auto registration tax, timeshare property taxes, miscellaneous charitable contributions, etc.). It will take some getting used to (have been itemizing for almost all my working life), but it should make getting ready for taxes easier.

Kurt
After I posted that I realized that I still need to do it for my state return. Ugh. How does Colorado compute their itemized deductions? Do they use actual expenses, percentage of Federal, or standard deduction?

When I went to high AGI and standard deduction using the calculator, it seemed that there were tax increases, but I suspect that the high income/high tax folks were in the AMT (their state taxes weren't deductible in the first place, lol), so I suspect that their AMT liability was significantly higher than the regular tax, therefore they will actually get tax relief from the new system.
 

PigsDad

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After I posted that I realized that I still need to do it for my state return. Ugh. How does Colorado compute their itemized deductions? Do they use actual expenses, percentage of Federal, or standard deduction?
Colorado's income tax is driven off of the federal return; specifically the "Federal Taxable Income" (1040 line 43). That amount is after the standard deduction / itemized deductions and exemptions. That amount is the starting point for the CO tax form, and then it adds back the state income tax deduction from Schedule A. After that, there are a few miscellaneous state-specific deductions and credits (529 contributions, solar, etc.). Then our tax is a flat 4.63%. Pretty simple, overall.

We also file North Dakota and Montana state taxes (due to some farm & oil lease revenue), and those states use a very similar process.

Kurt
 

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When my mother in law was still alive her accountant told me that most retirees have no savings and don't leave an estate.

I have purposely set things us so as not to leave an estate. My children are aware of this and are fine with this because of the way I have supported them financially over the years.
 

bogey21

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We made a huge mistake by sending our daughter to an expensive private school. Her schooling did no good. She has a Masters degree in the medical field and doesn't want to work. Problem is her husband is out of work and they have two kids.

I spent about $250,000 paying my Daughter's way all the way through a Masters degree. She has never had a career other than being the Mother of 3 great kids. Despite the cost I think her education has been a plus and have never second guessed the expense.

George
 

Panina

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I spent about $250,000 paying my Daughter's way all the way through a Masters degree. She has never had a career other than being the Mother of 3 great kids. Despite the cost I think her education has been a plus and have never second guessed the expense.

George
An education is priceless. Being a mother of 3 is a demanding career but if life ever changes and she has to work outside the home her degree will get her to interviews and give her a good chance on getting a job.
 

klpca

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Colorado's income tax is driven off of the federal return; specifically the "Federal Taxable Income" (1040 line 43). That amount is after the standard deduction / itemized deductions and exemptions. That amount is the starting point for the CO tax form, and then it adds back the state income tax deduction from Schedule A. After that, there are a few miscellaneous state-specific deductions and credits (529 contributions, solar, etc.). Then our tax is a flat 4.63%. Pretty simple, overall.

We also file North Dakota and Montana state taxes (due to some farm & oil lease revenue), and those states use a very similar process.

Kurt
Will your Colorado taxable income be higher now? If so are they adjusting the rates?
 
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Passepartout

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FRONT PAGE NEWS! New Tax Plan to cost Idahoans $100M. Buried deep in the article, it said that people were of the (mis)conception that there was going to be a tax reduction! HAH! Let's see now. Up is down, Peace is war, health care freedom is no health care, tax reduction nets government more money. AMAZING! Hold your wallet, because somebody else already has a firm grip on it.

Jim
 

VacationForever

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FRONT PAGE NEWS! New Tax Plan to cost Idahoans $100M. Buried deep in the article, it said that people were of the (mis)conception that there was going to be a tax reduction! HAH! Let's see now. Up is down, Peace is war, health care freedom is no health care, tax reduction nets government more money. AMAZING! Hold your wallet, because somebody else already has a firm grip on it.

Jim
What makes Idaho different?
 

Passepartout

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What makes Idaho different?
Idaho is certainly a different sort of place than Somewhere Out There, but for the the current discussion, my comment was the result of an article in my local fishwrapper.
 

PigsDad

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Will your Colorado taxable income be higher now? If so are they adjusting the rates?
Great question! I haven't heard of any adjustments being talked about, but since (according to the calculator I posted above) my taxable income is increasing, I would expect my state taxes to go up a bit (~$500 in my case). But Colorado has a law that says if the state runs a surplus, the $$ must be returned to the citizens. AND our state expenditures cannot increase more than a set percentage -- so they can't just spend the extra revenue. We had that case for a few years about 10 years ago, so if the overall tax revenue goes up I would expect a refund (it was in the form of a tax credit) in the coming years.

Kurt
 
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