Hopefully we can keep this thread open without being too political.
It is being touted as a tax cut , but I think our taxes will increase based on what Ive read so far.
They are getting rid of the AMT which is a plus as we’ve gotten hit with it for the last couple of years. They are also doubling the standard deduction which sounds great except that they are getting rid of exemptions, so if you have more than a couple of kids thats not a good thing. They are offsetting that with a higher child credit, but our income doesnt allow us to take the child credit anyway.
I really wish higher earners could get some of the education credits, that would be a plus.
Of course the devil is in the details, so this is just conjecture at this point.
Unless we have crunched the numbers wrong…if we can’t take a mortgage interest deduction, or property tax deduction…our taxes will be about $6000 higher. And that takes into account a higher standard deduction…big deal.
I agree with a lot of it. Simplifying the tax brackets and doubling the standard deduction. I’m not sure anyone in the 10% bracket wouldn’t come out ahead with that even if their new bracket is 12%. Also agree with a little credit for those of us who are taking care of our parents. I’ve been hit with the extra Obamacare tax and AMT recently and would love to see both of those go away - but that is selfish. I think eliminating some deductions will hopefully get some special interest groups less for themselves. Not sure how I feel about eliminating the deduction for state income tax. Feels like double taxation but it may also be an incentive for states to be thriftier.
We are hit with the Obamacare tax as well, that doesnt bother me considering its only .9% of income above 250k, which is negligible in the grand scheme of things. Anyone that is hit with that is already getting a break since they arent paying ss taxes on any amount over 118k. If your itemized deductions are over 24k, which our are, you will get a tax increase.
Many people on this board who live in high tax states like New York, New Jersey and California would pay higher taxes under this proposal, because they could no longer deduct their state taxes on their federal return.
I disagree that is is negligible. My health care cost has increased $12,000/year in the past 5 years (premium and deductible which still does not include any dental insurance so that out of pocket also). Any additional tax is adding insult to injury.
What I don’t understand is why reducing the number of tax brackets from what, seven, to three counts as tax simplification. Who here thinks that the complexity of our tax system resides in the number of tax brackets rather than figuring out what counts as taxable income? Once you figure out how much your taxable income is, all you have to do is look up how much you taxes will be; that is not hard!
Well, it will save time figuring out deductions. With the standard deduction at $24k for married couples, we won’t reach that figure with mortgage interest, charitable contributions, etc. Not saying it’s a good thing, just simpler.
If they were to eliminate the deductions for property taxes, would that include those on rental properties as well? It doesn’t seem like that would make sense, but the details are still to vague.
Our real estate taxes are huge here in NY so losing that deduction will increase our taxes a lot. And of course we also have state income taxes. As a self employed person I also have to pay a sizable chunk of change into social security.
I’ve never understood why having fewer tax brackets makes things similar either. If you are doing your taxes the old fashioned way you get to your taxable income, find the right table and it gives you the formula. Nowadays, it’s even simpler - your tax software does it for you. (Or your accountant.)
I also wish we a better way to describe tax brackets. Being in the 28% tax bracket doesn’t mean you are paying 28% of your income. Not by a long shot.
The highest income people (> $418,400 single, > $470,700 married joint) will get a tax cut due to the reduction of the top marginal rate from 39.6% to 35%. Those paying taxes on income from pass through entities (proprietorships, partnerships, and the like, including those used by large real estate investors, private equity, hedge funds, venture capital, etc.) will get a cut to 25% (see https://www.cnbc.com/2017/09/28/wealthy-financiers-could-gain-from-trumps-proposed-tax-cut-for-small-businesses.html ).
Also, heirs of the top 0.2% of estates (> $5.49 million) will benefit from the elimination of the estate tax.
We live in an unbelievably low property tax area (one reason we moved here) and have no deductions to speak of at this point in time. It looks to me like we will make out better with this plan. I still don’t support it, especially getting rid of estate taxes. That part won’t benefit me, since I’m not close to that rich.
When I have seemingly huge tax bills, I just tell myself we can afford it these days. We have more than we anticipated. We can share.
I do wish we could use these high taxes for affordable health care for all citizens.
@ucbalumnus we arent in that bracket, so that wont help us, yet we make too much to get the child credit, or any of the education credits. I dont want to sound like Im ungrateful but its like we are stuck in a middle income hole.
While our income is very good, we didnt have 529s for our kids because we didnt start making this type of money until the kids were in high school. So, we are full pay for college, and we dont get to take advantage of any of the college offsets.