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A Guide to the Tax Changes

MULTIZ321

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A guide to the Tax Changes
By Eugene Kiely/ FactCheck.org

"The Tax Cuts and Jobs Act is now law.

The House and Senate approved the bill on Dec. 19. It passed 227-203 in the House with no Democratic votes and 12 Republican “no” votes. The Senate then passed the bill 51-48 along strict party lines, with one Republican senator, John McCain, not voting.

Because of minor changes in the bill made by the Senate, the House was required to pass the bill again before sending it to the president. The House gave final approval on Dec. 20 by a 224 to 201 vote. Again, the bill received no Democratic support and was opposed by 12 Republicans. President Donald Trump signed it on Dec. 22.

Here we compare some of the major provisions of the new law with the previous tax code...."

Individual Income Tax Rates
The bill maintains seven individual income tax brackets, but changes the tax rates and thresholds. See the charts below.

Previous law: These are the tax brackets that individual taxpayers will use when filing taxes in 2018 for the 2017 tax year, according to the IRS (see pages 7-9).

Single Filers
Tax Bracket
Taxable Income
10 percent Up to $9,325
15 percent $9,326-$37,950
25 percent $37,951-$91,900
28 percent $91,901-$191,650
33 percent $191,651-$416,700
35 percent $416,701-$418,400
39.6 percent Over $418,400......


Richard
 

Roger830

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A big help to us retired folks on ss is the increase of the standard deduction from $12,700 to $24,000.
 

alwysonvac

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A big help to us retired folks on ss is the increase of the standard deduction from $12,700 to $24,000.

Before you go jumping for joy, make sure you read everything.
For example personal exemptions are eliminated and state & local tax deductions are capped.


Personal Exemption
A personal exemption is the amount that you can deduct from your income for every taxpayer and most dependents claimed on your return.

Previous law: $4,050 per person, which means a married couple with two dependents would receive a personal exemption of $16,200.

New law: The personal exemption is eliminated. The exemption returns after 2025.

State and Local Tax Deductions
Previous law: Taxpayers who itemize their taxes can deduct state and local property and real estate taxes, and either state and local income or sales taxes. For more information, see our item “The Facts on the SALT Deduction.”

New law: The SALT deduction will be capped at $10,000. The deduction limit ends after 2025.
 

rapmarks

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Before you go jumping for joy, make sure you read everything.
For example personal exemptions are eliminated and state & local tax deductions are capped.


Personal Exemption
A personal exemption is the amount that you can deduct from your income for every taxpayer and most dependents claimed on your return.

Previous law: $4,050 per person, which means a married couple with two dependents would receive a personal exemption of $16,200.

New law: The personal exemption is eliminated. The exemption returns after 2025.

State and Local Tax Deductions
Previous law: Taxpayers who itemize their taxes can deduct state and local property and real estate taxes, and either state and local income or sales taxes. For more information, see our item “The Facts on the SALT Deduction.”

New law: The SALT deduction will be capped at $10,000. The deduction limit ends after 2025.
It is funny how people don't realize that part. I always thought seniors got an additional personal deduction. I think a lot of people don't do their own taxes, so they don't realize this.
 

GetawaysRus

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Taxes are one of those things in life that are complicated, and I suspect that the GOP tax bill doesn't really simplify things. I have been trying to understand what's in the bill (I read somewhere that it's nearly 1,100 pages long, but I can't even verify that), but I suspect that I won't fully understand how the tax bill affects my own personal situation until I complete my 2018 income taxes in April 2019.

Nancy Pelosi is a modern-day sage. As she has said before, they had to pass the bill so that we can find out what's in it.
 
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Roger830

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Before you go jumping for joy, make sure you read everything.
For example personal exemptions are eliminated and state & local tax deductions are capped.
Since my wife retired, we have used the personal exemption even though in the high tax state of Connecticut.

I have always done my own taxes, except the first year I owned a rental property where I found an error when the expert did it.

The new tax law seems a positive for everyone except those with a high income in a high tax state.

The increase in the standard deduction is higher than the loss of the personal exemption for a senior couple.
 

SmithOp

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It is funny how people don't realize that part. I always thought seniors got an additional personal deduction. I think a lot of people don't do their own taxes, so they don't realize this.

Seniors get additional standard deduction, I haven’t read the bill yet so don’t know if that changes.

If you are legally blind there is another bump to the standard deduction.

Don’t confuse Exemptions with Deductions.

From irs dot gov web site:
Increased Standard Deduction - Additional Standard Deductions

Age: If you are age 65 or older, you may increase your standard deduction by $1,550 if you file single or head-of-household. If you are married filing jointly and you OR your spouse is 65 or older, you may increase your standard deduction by $1,250. If BOTH you and your spouse are 65 or older, you may increase your standard deduction by $2,500.



Sent from my iPad using Tapatalk Pro
 

rapmarks

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Seniors will still get an additional deduction,close to the current one, someone posted that elsewhere.
Just roughly looking at my bracket, I don't think I am a winner. Of the returns I do, neither of my children will win, my sister will save a little.
But I won't have to stay up at night worrying about the estate tax.
 

VacationForever

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It is funny how people don't realize that part. I always thought seniors got an additional personal deduction. I think a lot of people don't do their own taxes, so they don't realize this.
  • If you are over age 65, blind or disabled, you can tack on $1,300 per person to your standard deduction ($1,600 for unmarried taxpayers).
 

VacationForever

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I just realized that we are going to lose the deduction for financial advisor/management fees. I am not complaining because the new tax law is not intended to help folks like us who can afford to pay for such fees. Initially I had calculated that the law would save us about 6K in 2018, and now it is down to 1K savings. I think we will end up paying more in the old tax system than the new by 2019.
 

Luanne

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pedro47

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Richard, thanks for the facts check Information.
 

Passepartout

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Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.

Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.

Jim
 

VacationForever

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Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.

Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.

Jim
Looking ahead, we are relieved that 32% starts at $315K, although we will be nowhere near that bracket, unless we win the lottery...
 

WinniWoman

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I am not worrying about any of it. I am going to just do my taxes like I always do on Tax Act and whatever it is it is. I only am concerned that being in NY we lose the state and local tax exemption and property tax deductions are capped at $10,000. But what can I do about it? Nothing... until I can move the hell out of here.
 

CalGalTraveler

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We live in one of the high tax states but are not rich. Higher income but higher cost of living...everything is relative.

This will have a devastating effect on our taxes and ability to stay in our beloved home of 18 years because of the SALT cap on state taxes.

I hope several things happen in the next year:

1) The state government finds a way around this to avoid high tax payers from moving out of state.
a) Calif. is discussing moving state taxes into the payroll tax which will reduce our AGI and enable the write-off of what remains.
b) converting the California school systems to 501c3 to transition school taxes to charitable write-offs. Apparently several states already do this.
c) lower property and state income taxes (pigs will fly)

2) The new regime after the 2018 mid-terms will repeal the SALT cap.


The wealthiest will establish corporations and pass-thru entities for their homes and rent them back to themselves to continue to get the full SALT deduction and stay in their homes. The middle will be forced to sell their homes and downsize to a smaller property tax footprint, leave the state, or become renters.

This legislation is a trojan horse...while some of your taxes may go down for now, it will be more than offset by decreases to your Social Security, and increases to Medicare/Health plan costs to pay for the newly increased deficit spend from this legislation...just wait.
 
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Roger830

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Since my DW became eligible for Mandatory Minimum Distributions in this year, and I get hit with MMDs in '18, along with the new tax law's effects with be the need to either pay a LOT of taxes next year, OR make a LOT of charitable contributions. Probably both. Oh, and either arrange for some substantial 'withholding' or plan on writing a big check at tax time. Problem with that is if one writes the big check from tax advantaged accounts (you know, those IRAs we contributed before tax dollars to?) it just triggers yet another 'taxable event'.

Time to develop a strategy. We're contemplating forming a foundation. Sheesh!- I just thought those were just for RICH people! Which we aren't.

Jim

I once worked for a small engineering consulting firm.

One time around tax time, the owner was complaining to me about his high taxes. I told him that he should consider himself fortunate, that I wished I paid more taxes. He turned many shades of red.
 

wilma

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The new tax law seems a positive for everyone except those with a high income in a high tax state.

No, it will also be a negative for middle income people in high tax states......
 

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One time around tax time, the owner was complaining to me about his high taxes. I told him that he should consider himself fortunate, that I wished I paid more taxes.
My dad once told me something similar. I recall it as wishing he made enough to pay a million dollars in taxes.

It just demonstrates that the wealthy have problems, just like the less so. They are just different problems.

The point, though is that during our working lives we've been told to save and invest in those IRAs, then in the year you turn 70 1/2, you have what amounts to a semi-unexpected windfall that you have to pay taxes on, or give away.
 

CalGalTraveler

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The $11,300 increase in the standard deduction and the $2000 child credit plus the lower rate should be a positive for most.

I believe the personal exemption is now eliminated. Wouldn't this elimination offset this benefit? For our family that is a loss of $16,200.

By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us. A net increase of $33,000 per year in taxable income without a raise and same cost of living! and growing if property taxes continue to increase. Plus we are paying for 2 kids in college.

Can you imagine adding $33,000 to your tax bill every year? Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.
 
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Luanne

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I'm suggesting to dh that we have our taxes figured using itemized deductions and just the standard deduction to see which way we come out better.
 

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Children 17 or older (even if still claimed as dependents) don't qualify for the $2k credit either.

I believe the personal exemption is now eliminated. Wouldn't this elimination offset this benefit? For our family that is a loss of $16,200.

By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us. A net increase of $33,000 per year in taxable income without a raise and same cost of living! and growing if property taxes continue to increase. Plus we are paying for 2 kids in college.

Can you imagine adding $33,000 to your tax bill every year? Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.
 

VacationForever

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I believe the personal exemption is now eliminated. Wouldn't this elimination offset this benefit? For our family that is a loss of $16,200.

By my math, $13,300 is pennies compared to the loss of $30,000+ SALT deduction and $16,200 loss of the personal exemption. Our children are over 18 (in college) so this is only $11,300 for us. A net increase of $33,000 per year in taxable income without a raise and same cost of living! and growing if property taxes continue to increase. Plus we are paying for 2 kids in college.

Can you imagine adding $33,000 to your tax bill every year? Again, we are not rich (and will be much lesser so) after this change if we don't sell our home or do tax avoidance moves.
You are considered RICH by the middle class American's standard. In a separate post you had indicated that you have multiple homes. We do not have issues with wealth disparity but this new tax law is not supposed to reduce taxes for the rich individuals, only for corporations and middle class Americans.
 
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