@Dave_N I think you can only deduct 1.5 years. Does your city bill for the entire year 2018 or just 2017-2018?
@Madison85 because without the deduction, my best fixed income investment is paying off the mortgage.
With the deduction, I can get a higher return buying other people’s mortgages in a GNMA fund in my retirement account and buying stock in my taxable account. Jan 2, I’ll sell some stock, pay off the mortgage and then rebalance to put move funds from the GNMA into stock in my retirement account. It’s a bit of a shuffle, but it’s a win.
It wouldn’t be a matter of an individual employee negotiating. Rather, Google would set up a structure so that employees could choose to be contractors to save $$$ in taxes.
As it happens, one of my bike buddies is in management at Google. He was one of the first 100 or so employees at Google, so he’s pretty high up. So I asked him today whether Google would be open to setting up an employment structure such that employees would get higher pay (by avoiding taxes) while Google didn’t have to pay more. And he said of course they would. It only takes one of the big tech companies to have a bright tax lawyer with ideas for all of the tech companies to get on board.
Interestingly, in the bill, architects and engineers are explicitly classified as not “professional service” providers, which is to say architects and engineers are eligible to get lower income tax rates than, say, doctors. Go figure. Who knows if Google can set up a subsidiary and employ all their engineers as contractors, for lower taxes; I haven’t read the bill, so I don’t know how “engineer” is defined there.
Oh!- You mean you can’t deduct it because you won’t be over $24k in itemized deductions, not that the mortgage interest deduction is disallowed.
Similarly, I have a HELOC to pay off this month
@“Cardinal Fang”
That’s how the statute seems to be worded, but as others have pointed out it’s not really possible to pre-pay property tax until it has been assessed – overpayments are typically refunded. As I noted above, the property tax bill I get with installments due in late 2017 and early 2018 is for taxes that were “assessed” for the year 2017 … so yes, I can “pre-pay” the second installment – but that is still my 2017 tax bill. If I send in money beyond that, the local authorities have no way to account for it so they’ll send it right back. (Whereas the state income tax people are perfectly happy to hang on to my money however I designate it).
Maybe it works differently in other states – but here is another factoid – at least where I live, the property tax asssessment and payment history is public information available online. I can go to my assessors web site, enter in the property address, and pull up the tax records and see the total taxes by “assessment year” and records of dates installments are due and the dates they are paid. I don’t need a password or any personal info – in fact, I can just as easily check all my neighbors. (Which is kind of interesting in California because of the Prop 13 property tax limits – our taxes on identical tract homes in the same block are all over the place depending on year of purchase and purchase price.)
@“Cardinal Fang”
As has been repeatedly pointed out, it doesn’t matter what someone at Google or anyone else thinks about who is a contractor or an employee. The IRS has specific tests for this. They will decide who is a contractor or employee.
Here’s the scam: Google forms another company, Pass-Through Inc. Google engineers are owners of Pass-Through Inc. Pass-Through provides engineering services to Google, and bills Google for the total remuneration the Google employees would otherwise get, including the cost of the health insurance and both sides of FICA, amounts that Google would have been paying in any case. The engineers get a profit share in lieu of a salary. It is taxed at the pass-through rate.
@calmom : You are correct. When it looked as though the bill would allow only deduction of property taxes, I asked out [California] county treasurer if I could pay a portion of installment #2 in order to get to the $10K cap in 2018 (yes, my property taxes are far more than $10K a year) and got the answer (which did not surprise me) that they could only handle a full payment, so I expect the same would apply to an attempt to pay taxes that have not yet been determined/assessed.
I think that the complicating factor for property taxes is that there needs to be a public record for title information to be accurate – title companies and potential real estate buyers need to know whether taxes are paid current or in arrears-- so there are potential complications of taking partial or advanced payments could impact marketablity of properties.
The part I’m having difficulty wrapping my head around is this new 20% deduction for self-employed. I am a sole-proprietor, self-employed, with all earned income reported on a schedule C. Moderate income; no employees. So as far as I can figure, from 2018 going forward at least to 2025, I will only have to pay taxes on 80% of my net earnngs fraom self employment.
But it doesn’t make sense to me as a matter of tax policy – unless the emerging gig economy is seen as a desirable societal goal. It really incentivizes people to opt for classification as contractors rather than employees. But the long-term impact is fewer people receiving or eligible for employer-provided benefits such as unemployment insurance or worker’s comp. So short term financial benefit for independent contractors and freelancers, but long-term loss when it comes to the safety net that typical employment provides. So maybe the bill needs to be retitled, “Tax Cuts and Fake Jobs Act”.
I skimmed, so forgive if this has been posted.
Cook County, Illinois County Assessor has all the property tax bills on-line for prepayment. Normally due March 1. Lots of takers on the early payment option. (Chicago and some ‘burbs)
Just for clarification – if your tax bill is online now, but “due” March 1st – you probably aren’t prepaying. You are simply paying the bill earlier than you have to.
I can see from the Cook County website that the bills being mailed out now are for the 2017 assessment year:
http://www.cookcountyassessor.com/Office/News.aspx?id=444
So that simply means that for Illinois each year you receive a bill for the previous year’s assessment. You have the choice to pay right away or to pay at the last possible minute, but either way – you are paying for the year 2017. (Apparently you won’t get billed for 2018 until near the end of the year).
The issue that is being addressed in the tax code with respect to income tax is that some people might decide to try to pay taxes they know they will incure in 2018 in 2017.
As does a state like California, where Google (and Apple) are headquartered.
And qualified stock options???
Yes, that is the rub. Contractors aren’t eligible for stock options. I expect a fair number of employees will not want to give those up.
I do think that when you look at the big picture including employee benefits, the independent contractor option is a lot less attractive, especially at a company like Google which has very generous benefits. It’s a lot more than stock options. Does the hypothetical Pass-Through Inc offer sick pay and paid family leave? Is there are partnership match for 401K contributions? What kind of health insurance does Pass-Through Inc offer? Is there a death benefit to match Google’s generous offering? Or severence pay when Google no longer wants the services of a particular Pass-Through partner?
To me, the more worrying concern is the one I raised in post #2429 – not the high paid employees at Google, but the gig economy workers who are making ends meet by driving for Uber or Lyft or Amazon Flex, and other companies that are increasingly relying on outsourcing. In the short term the 20% deduction might seem attractive enough to encourage more people to opt for contract work rather than seeking regular employment – but they are giving up safety-net protections like workers comp and unemployment insurance – and the legal lines between employee / independent contractor are a lot fuzzier once moving outside the realm of full time employment related to the employer’s core business. And if more people opt for that type of work, market forces might tend to drive down rates for those services – the company has no incentive to reward long-term contractors when there are new people coming on board every day eager to pick up the slack.
There is going to be a quite a surprise I bet when people figure out that the 20% reduction does not apply to how their State defines the taxable business income
H@Calmom, you are probably right technically as regards the Cook County, Illinois taxes. However, if you go to the cookcountytreasurer-dot-com, the bill payment option due March 1, 2018 is labelled: Prepayment of First Installment.
I guess we are too stupid in Cook County to follow for a “Pay Early” option. All our news announcements likewise refer to a Prepayment Option.
wrong thread
In case anyone or anyone’s company is a college sports season ticket holder, beginning in 2018, the 80% deductibility of the required charitable contribution that’s paid in order to be eligible to buy season tickets will be 0% deductible as a charitable contribution.
That actually makes sense. If it is required, it is not really a donation. Consequently, the college should also be required to call it taxable income.