Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

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CAsage
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by CAsage »

abredt wrote: Fri Dec 22, 2017 3:49 pm OOPS - I already pre-paid my 2018 California state tax in anticipation of the tax bill being signed.
The payment has cleared the bank.
Dumb move by me.

What will happen?
Thanks, cb
Me, too. If I can deduct it (looks very unlikely), then fine. If not, well you just paid your April 2018 estimated taxes a bit early, no harm. Nothing will happen! I pay State estimated taxes already, so I will just keep track of that amount vs total owed later, and report it on your 2018 CA 540.
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omert
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by omert »

Question about recharacterization from non-deductible tIRA to Roth for 2017.

As I understand it, there should be nothing that precludes me recharacterizing 2017 non-deductible tIRA to Roth if I figure out that my income was low enough to qualify (I will probably qualify for partial contribution for 2017).

Since there was a change to Roth -> tIRA rules I want to get a second opinion if this will be possible going forward or I should do it before the year ends?

The way I understand it, the new rule was done to preclude people from taking advantage of market drops, but in this case, there wasn't a deduction from the get-go so it shouldn't be a problem.

Any insights?
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by LadyGeek »

The following discussions are available elsewhere:

- Roth Recharacterizations in 2018 for 2017 Tax Year?
- Vanguard’s take on the tax bill
- Question about pass through income in new tax law

Please consider continuing your discussion in those threads.

Tip: To copy a post into a new thread, quote the post using the " " " in the top-right corner of the post. Then, copy-n-paste it as a new reply into the thread.
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KATNYC
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by KATNYC »

animule wrote: Fri Dec 22, 2017 12:54 pm Thanks, guys. We have a chance in the county I live in in New York State to pre-pay the county tax, which I will do since I will lose out on the deduction in 2018 since it is capped at $10k.

A lot of the reporting on these changes implies the $10k cap only applies to property taxes; I did not realize it is also state income taxes plus property taxes. This is going to affect a lot more people in my community than I would have thought.
[OT comments removed by admin LadyGeek]

Many people don't understand the details & are just hearing they will get more money per paycheck.
NY SALT $10K limit is going to hit a ton of people.

Ex:
$4k state & local taxes is average for a $50k salary in NYC
×2 if married so $8k in NY state & NYC taxes at $50K each.
Real estate taxes per year are easily $12k+ in long island.
Add modest mortgage interest on a $300K home at 10k.
Plus the $4,150 exemption 2018 per person ($8,300 if married) was eliminated.
Job expense deductions were also eliminated including tax preparation fees.
$38,300 in deductions

A couple earning $100K w2 based on current law without adding job-related expenses like travel reimbursement, books/tuition, buying & cleaning uniforms (cops, firefighters), union dues or guns/ammunition for cops can deduct at least $38,300.

Under the new law the limit is $24K.
You can still itemize but it makes no sense given the SALT limitation.
The same ex as above becomes:
$10K SALT/RE taxes
mortgage interest 10k
$20K

Not a huge difference in the amount of tax paid on $76,000 v. $61,700 but to a couple expecting to benefit, they will be surprised.

Add in a child under 16 (cop couple I know has a young son) and it's a little better but still no increase.

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Last edited by KATNYC on Fri Dec 22, 2017 4:39 pm, edited 1 time in total.
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newcollegeman
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Re: Tax Bill Omnibus Thread

Post by newcollegeman »

Stormbringer wrote: Wed Dec 20, 2017 5:51 pm
letsgobobby wrote: Wed Dec 20, 2017 5:50 pm Are rental property expenses such as mortgage interest and taxes still fully deductible on schedule E?
Yes. The limitations apply to Schedule A, not Schedule E.

Also, it looks like you can now fully expense some big ticket repairs (roofs, furnaces, etc.) that previously you needed to depreciate.
Can anyone confirm the last statement: that "some big ticket repairs (roofs, furnaces, etc.) that previously you needed to depreciate" can now fully be depreciated on Schedule E for rental property?
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Peter Foley
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by Peter Foley »

First - thanks to Alex for opening this up. With a number of individuals having questions regarding different provisions of the tax bill, I think a single thread was a reasonable approach. The being said, Lady Geek Wrote:
I'd also like to make a shameless request for help updating the wiki. The new tax law will impact the articles here: Category:Tax considerations

Suggestions are welcome by posting in the Suggestions for the Wiki
Organizing some of the changes, questions and strategies by topic makes a lot of sense and the Wiki is a good place to do it. My inclination would be to organize it in same way as the tax bill itself. This would allow for references back to the bill language which will be needed as this is interpreted, as rules are written, and as IRS interpretations are published.
Last edited by Peter Foley on Fri Dec 22, 2017 10:03 pm, edited 1 time in total.
BusterMcTaco
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by BusterMcTaco »

I put together this graph of the MFJ tax brackets (green) versus AMT (blue, and the red segment is the exemption phase-out range) with a variable for your deduction (d). I hope I got the math right!

https://www.desmos.com/calculator/csqqhwbjsf

Looks like a standard deduction taker will never hit AMT. Itemizers will start seeing a range of AMT payments around d=$37,000. I have no idea how the 199A (pass-through) deduction will play with AMT, but I sure hope it's not disallowed under AMT, or those of us taking it won't find much use until what seems to be $750k income (very hard to do the exact calculation because income level itself will affect the allowable deduction, as will whether it's a service business, and whether it pays employees on W-2).
MrJones
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by MrJones »

Within the last week or two, someone here had a link to a website that plotted a graph of income versus tax savings under the new tax law. If anyone knows what I'm talking about, would you please mind posting the link if you have it? Thank you.
Railroader
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by Railroader »

I am wondering if union dues and meals and entertainment is still deductible? Last year and this year ill have 24k to deduct all together but looking forward i think ill have to take standard deduction as the meals and entertainment was about 12k of that.
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torius71
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Re: Tax Bill Omnibus Thread

Post by torius71 »

VictoriaF wrote: Thu Dec 21, 2017 4:09 pm After thinking about the implications of the new tax rules, I came up with the following logic:

The termination of Roth Recharacterization strengthens Backdoor Roth:

1. Roth Recharacterization was required for those who had exceeded the annual Roth Conversion limit.
2. Since 2010, the limit on Roth Conversions has been removed, and thus the need for Roth Recharacterization has disappeared.
3. After 2010, Roth Recharacterization was used to hedge one's portfolio performance: do Roth Conversion for more than you need and then Recharacterize back to Traditional IRA whatever has performed the worst.
4. Starting in 2018, Roth Recharacterizations will not be allowed.

5. Conclusion: There will be no limits on Roth Conversions. Backdoor Roth is here to stay.

Victoria
I think I understand your point, but I don't agree with the conclusion. As long as there are income limits on direct Roth contributions, I see this as a loophole and the evolution of the law doesn't change that interpretation. Previous budgets have proposed eliminating the ability to convert non-deductible contributions and I think that risk remains. I would still advise monitoring for future changes, especially those contributing after-tax to employer plans with hopes of converting upon termination of employment.
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Sparky1500
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by Sparky1500 »

I am a single-owner of a dental practice operating as an S-corp. Does it make sense to return dividends paid out to me this month and instead use those funds to pre-pay 2018 expenses in order to take into account the new tax law changes?
Retired August 3, 2018 and very grateful.
BusterMcTaco
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by BusterMcTaco »

Sparky1500 wrote: Fri Dec 22, 2017 9:25 pm I am a single-owner of a dental practice operating as an S-corp. Does it make sense to return dividends paid out to me this month and instead use those funds to pre-pay 2018 expenses in order to take into account the new tax law changes?
I am not an accountant, nor am I trying to play one on the internet. I think the answer is:

If you will have under $157,500 ($315,000 if MFJ) qualified business income next year (which I think is essentially your dividends), then yes... that could make sense.

If you will be in the range of $315,000-$415,000 (MFJ) or $157,500-$207,500 (single), then next year you will actually be paying a significantly higher de-facto marginal rate due to the phase-out (in the MFJ case you will be taxed on $173,000 over the course of earning $100,000... at 32%, that's 55.36% effective marginal federal tax). I am in this boat (will be right above $315,000 MFJ) and so I'm actually trying to do the opposite. :sharebeer
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by RetiredCSProf »

RE: Deletion of Misc Deductions
Railroader wrote: Fri Dec 22, 2017 7:47 pm I am wondering if union dues and meals and entertainment is still deductible? Last year and this year ill have 24k to deduct all together but looking forward i think ill have to take standard deduction as the meals and entertainment was about 12k of that.
No, not deductible in 2018. Unreimbursed employee expenses, such as entertainment and travel, were previously deductible under Miscellaneous Deductions (Section 67 of IRS tax code) under the regular tax system (but not under AMT). They have been deleted from the IRS tax code:

SEC. 11045. SUSPENSION OF MISCELLANEOUS ITEMIZED DEDUCTIONS.
(a) In General.—Section 67 is amended by adding at the end the following new subsection:
“(g) Suspension For Taxable Years 2018 Through 2025.—Notwithstanding subsection (a), no miscellaneous itemized deduction shall be allowed for any taxable year beginning after December 31, 2017, and before January 1, 2026.”.
(b) Effective Date.—The amendment made by this section shall apply to taxable years beginning after December 31, 2017.
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Re: Tax Bill Omnibus Thread

Post by Leif »

rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by LadyGeek »

Peter Foley wrote: Fri Dec 22, 2017 6:31 pm First - thanks to Alex for opening this up. With a number of individuals having questions regarding different provisions of the tax bill, I think a single thread was a reasonable approach. The being said, Lady Geek Wrote:
I'd also like to make a shameless request for help updating the wiki. The new tax law will impact the articles here: Category:Tax considerations

Suggestions are welcome by posting in the Suggestions for the Wiki
Organizing some of the changes, questions and strategies by topic makes a lot of sense and the Wiki is a good place to do it. My inclination would be to organize it in same way as the tax bill itself. This would allow for references back to the bill language which will be needed as this is interpreted, as rules are written, and as IRS interpretations are published.
Thank you! That's a very good suggestion. We've started a draft page in the wiki, but it's very bare bones and needs a lot of work. We'll start a separate discussion thread in the next day or so.

Readers can see wiki activity by clicking on Recent changes which is in the left-side menu of every wiki page (not available in mobile view).
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Re: Tax Bill Omnibus Thread

Post by grabiner »

Leif wrote: Fri Dec 22, 2017 10:41 pm
rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
Some states only allow you to itemize on the state return if you itemized on the federal return. If you live in one of those states, you might want to itemize on federal taxes even if you are slightly short of the standard deduction.
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PhysicianOnFIRE
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Re: Tax Bill Omnibus Thread

Post by PhysicianOnFIRE »

MtnBiker wrote: Fri Dec 22, 2017 12:24 pm
PhysicianOnFIRE wrote: Fri Dec 22, 2017 8:08 am
Why start a donor advised fund now? Doing so will allow you to take a full deduction at this year’s presumably higher marginal tax rate (assuming you itemize currently). Let’s say, for example, that you plan to donate $10,000 a year over the next five years.

If you donate $10,000 to charity in each of the next five years, you would not receive any deduction unless your other itemized deductions total at least $14,000. The donation would only be fully deductible if your other itemized deductions total at least $24,000. And you will probably be receiving the deduction at a lower marginal tax rate. I expect that to be 24% for us based on my income in the coming year(s).

Conversely, you could start a donor advised fund with $50,000 in appreciated funds today. You’ll eliminate the capital gains in those funds, get a tax refund of your marginal tax rate (for me, that would be 33% of $50,000 = $16,500 plus a state tax refund). You could then give $10,000 (plus investment returns) from the DAF to your selected charities each of the next five years.

To me, it’s a no-brainer, particularly if you already have a taxable account with one of the “big three” brokerages that have low cost funds and similar charitable DAF programs. Those being Vanguard, Fidelity, and Schwab, and they make it simple to open a DAF. The latter two can be opened with as little as $5,000 and allow grants from your fund starting at $50. Vanguard’s minimums are steeper at $25,000 to open and $500 for a grant from the fund.

Finally, don’t think of tax optimization of charitable giving as getting the most back for your donated dollar. Think of it as getting the most money to charity for each dollar you actually part with. You could hand the food shelf a $100 bill or you could give $180 in a tax-deductible manner and it would cost you $100. Which do you think the charity prefers?

:beer
-PoF
Using a DAF makes sense if you are donating appreciated funds from a taxable account. How does it help if the donation does not have imbedded capital gains, or is from a traditional IRA and one is under age 70 1/2 (not able to use a QCD)? In such cases, and using your example, wouldn't it be better to save $500 in DAF fees and just give the 50K in cash to the charity and let them decide the best use of the money?
The DAF fees (0.6%) can be similar to your tax drag, depending on where you live (state income tax), your income and how much you receive from your funds in dividends and / or capital gains.

Is it better to give $50K now to the charity rather than spread it out over years. Dealer's choice, but I've found charities like to ask for more and more every year. If you donate $50K, the recipient will send you an envelope and a letter asking for $60k next year. A DAF makes it incredibly easy to donate anonymously, too, if that's your wish.

The bunching of deductions is also key now that the standard deduction will be $24k. You can donate every year from the DAF and every donated dollar will have benefitted from a tax deduction.

:beer
-PoF
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by crumbone »

flyninjasquirrel wrote: Fri Dec 22, 2017 9:40 am
Allan wrote: Fri Dec 22, 2017 6:29 am For high income earners there were phase outs for certain items in the current tax code, I assume with so called simplification that those no longer apply?
My understanding is that the Pease limitations were removed. Since these were basically a phaseout for exemptions and itemized deductions, it seems they would have hit less people anyways due to removal of personal exemptions into a larger standard deduction. Nevertheless, they are gone.

https://www.kitces.com/blog/final-gop-t ... trategies/

Can anyone further explain individual AMT in the TCJA? If I am correct, with an AMT exemption phaseout at $1 mil for MFJ, I would have to be above that threshold to get hit with AMT at all?

Also, were there any changes the the 0.9% additional Medicare tax? I haven't seen it mentioned anywhere.
The AMT exemption is increased to $70,300 if single and $109400 of MFJ, and phases out at $500k and $1M respectively. Furthermore, the SALT cap reduces one of the biggest deductions that resulted AMT exposure, and expanded standard deduction gives less incentive to itemize. Whether you'll pay AMT is a question that can really only be answered by calculating your TMT under the new rules and comparing it to your regular tax. I suspect most either won't be subject to it anymore, or will at a minimum no longer suffer from the "bump" zone created by the exemption phaseout (with effective ~35% marginal tax.)

These AMT changes seem to be the one significant boon to individual taxpayers in high-tax states, albeit only for those who make enough to pay AMT under the current system.
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Re: Tax Bill Omnibus Thread

Post by fundseeker »

(I deleted my post about one of the calculators being incorrect. I had made an error in my entries. Sorry!)
Last edited by fundseeker on Sat Dec 23, 2017 9:42 am, edited 1 time in total.
MikeG62
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Re: Tax Bill Omnibus Thread

Post by MikeG62 »

fundseeker wrote: Sat Dec 23, 2017 9:29 am
SrGrumpy wrote: Wed Dec 20, 2017 1:44 pm
Diogenes wrote: Wed Dec 20, 2017 1:34 pm Re: Calculators for the Tax Reduction and Jobs Act
Anyone know of a good two-year comparison calculator of the tax bill before and after the new Act?
www.taxplancalculator.com (ymmv).

Also a Forbes FAQ here:

https://www.forbes.com/sites/kellyphill ... nd-answers
Ths "taxplancalculator" is inaccurate! It tells me I will pay $500 less under the new plan! How does it know that when it does not ask what I paid last year. I got several exemptions in 2016 that I will not get in the future. It does show that same amount in taxes I will pay as the first calculator someone listed, but that first calculator shows that I will be paying $3,000 more in taxes in 2018!!! So, this calculator is FAULTY!!!
I don't think it needs to know what you paid last year. It is comparing 2018 under the new rules and the old rules (and shows you the computation under each set of rules). You should input the # of dependents you expect to have in 2018 and you should have an apples to apples compare.

I think these high level calculators are not designed to handle more complex things. But for straight forward wage income they should get you close.
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mike_in_ny
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by mike_in_ny »

I have not seen a discussion related to dependent children in the college-age category. I understand that the
$2k tax credit benefit is for children up through age 16, and there are no individual deductions anymore.

So I'm thinking about what that means for those of us with a kid that is over 16, but not yet out on their own yet
because they're in high school or college. Both for the parent and the kid's tax return (assume they make
~$4k/year) with some capital gains.

Would appreciate folks thoughts.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by MikeG62 »

mike_in_ny wrote: Sat Dec 23, 2017 10:14 am I have not seen a discussion related to dependent children in the college-age category. I understand that the
$2k tax credit benefit is for children up through age 16, and there are no individual deductions anymore.

So I'm thinking about what that means for those of us with a kid that is over 16, but not yet out on their own yet
because they're in high school or college. Both for the parent and the kid's tax return (assume they make
~$4k/year) with some capital gains.

Would appreciate folks thoughts.
Mike, if they are still in school and not yet (i think it is) 24 (i.e., they meet the "qualifying dependent" rules), you can get a $500 tax credit for each of them.

I think Kitces write-up provides some info on the second part of your question (kiddie tax rules).
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treesrock
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Re: Tax Bill Omnibus Thread

Post by treesrock »

Mudpuppy wrote: Thu Dec 21, 2017 3:15 am
jsong23 wrote: Wed Dec 20, 2017 2:50 pm Is there any mention of eliminating tax deductible contributions to 457B plans?

I found something on-line in 9/2017 but have not seen anything recently.
Most of those proposed changes didn't make it into the final bill. Wording that would have applied one annual contribution limit to all 401(k), 403(b), and 457(b) plans was dropped relatively early on. Wording that would have lowered the annual pre-tax contribution limits was also eliminated. This page talks about how the bill backed off on many of the proposed changes: https://www.plansponsor.com/gop-tax-cut ... se-senate/
treesrock wrote: Wed Dec 20, 2017 1:24 pm What are people doing with their governmental and non-governmental 457(b) contributions starting January 2018? I am reading mixed things about how these non-qualified accounts are going to be taxed, etc, and I can't make any sense of the bill itself.
The language retained in the reconciled version with relation to non-qualified deferred compensation relates primarily to stock options. The key search phrase you'd want to use to find more information about this is "Qualified Equity Grants". The Kitce blog referenced upthread had a very brief (and somewhat poorly worded IMHO) paragraph on this, which may be leading to the confusion. The following page has a more in-depth analysis towards the bottom of the page: https://tax.thomsonreuters.com/media-re ... -jobs-act/

You can also open the text of the bill link given on page 1 of this thread and scroll down to "PART VII—Employment". Not the easiest of reads, but it's more authoritative than any other source.
Thanks MudPuppy, I've confirmed with my governmental 457(b) representative, and it seems the new tax law changes nothing about the Virginia state 457(b). So good news from my standpoint.
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Re: Tax Bill Omnibus Thread

Post by VictoriaF »

torius71 wrote: Fri Dec 22, 2017 9:01 pm
VictoriaF wrote: Thu Dec 21, 2017 4:09 pm After thinking about the implications of the new tax rules, I came up with the following logic:

The termination of Roth Recharacterization strengthens Backdoor Roth:

1. Roth Recharacterization was required for those who had exceeded the annual Roth Conversion limit.
2. Since 2010, the limit on Roth Conversions has been removed, and thus the need for Roth Recharacterization has disappeared.
3. After 2010, Roth Recharacterization was used to hedge one's portfolio performance: do Roth Conversion for more than you need and then Recharacterize back to Traditional IRA whatever has performed the worst.
4. Starting in 2018, Roth Recharacterizations will not be allowed.

5. Conclusion: There will be no limits on Roth Conversions. Backdoor Roth is here to stay.

Victoria
I think I understand your point, but I don't agree with the conclusion. As long as there are income limits on direct Roth contributions, I see this as a loophole and the evolution of the law doesn't change that interpretation. Previous budgets have proposed eliminating the ability to convert non-deductible contributions and I think that risk remains. I would still advise monitoring for future changes, especially those contributing after-tax to employer plans with hopes of converting upon termination of employment.
Nothing is permanent and monitoring the taxation law is an excellent habit. My point is that they canNOT have both:
(1) Roth conversion limits and
(2) prohibition of Roth recharacterization.

If they impose Roth conversion limits they will need to allow Roth recharacterization for those who will have made a mistake.

Victoria
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Re: Tax Bill Omnibus Thread

Post by delamer »

grabiner wrote: Fri Dec 22, 2017 11:26 pm
Leif wrote: Fri Dec 22, 2017 10:41 pm
rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
Some states only allow you to itemize on the state return if you itemized on the federal return. If you live in one of those states, you might want to itemize on federal taxes even if you are slightly short of the standard deduction.

This is the issue we face. Our governor has indicated that he is open to adjusting the state tax system in light of the federal changes, but who knows what will happen or when?
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by RetiredCSProf »

mike_in_ny wrote: Sat Dec 23, 2017 10:14 am I have not seen a discussion related to dependent children in the college-age category. I understand that the
$2k tax credit benefit is for children up through age 16, and there are no individual deductions anymore.

So I'm thinking about what that means for those of us with a kid that is over 16, but not yet out on their own yet
because they're in high school or college. Both for the parent and the kid's tax return (assume they make
~$4k/year) with some capital gains.
Single parents with dependents who are age 16-24 and full-time students can file as Head of Household (HH) instead of Single; Makes a big difference, compare:

HH std deduction = $18K
HH 22% bracket: Over $51,800 but not over $82,500; tax = $5,944, plus 22% of the excess over $51,800
HH 24% bracket: Over $82,500 but not over $157,500; tax =$12,698, plus 24% of the excess over $82,500.

Single std deduction = $12K
Single 22% bracket: Over $38,700 but not over $82,500; tax = $4,453.50, plus 22% of the excess over $38,700
Single 24% bracket: Over $82,500 but not over $157,500; tax = $14,089.50, plus 24% of the excess over $82,500.

I think I read that dependents with less than $12K of income do not need to file an income tax return.
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Re: Tax Bill Omnibus Thread

Post by KATNYC »

grabiner wrote: Fri Dec 22, 2017 11:26 pm
Leif wrote: Fri Dec 22, 2017 10:41 pm
rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
Some states only allow you to itemize on the state return if you itemized on the federal return. If you live in one of those states, you might want to itemize on federal taxes even if you are slightly short of the standard deduction.

We itemize Federal & take standard for state, have for at least 4 years.
We are in NY. Check to see if you need to itemize state before getting too worked up.
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Re: Tax Bill Omnibus Thread

Post by delamer »

KATNYC wrote: Sat Dec 23, 2017 4:08 pm
grabiner wrote: Fri Dec 22, 2017 11:26 pm
Leif wrote: Fri Dec 22, 2017 10:41 pm
rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
Some states only allow you to itemize on the state return if you itemized on the federal return. If you live in one of those states, you might want to itemize on federal taxes even if you are slightly short of the standard deduction.

We itemize Federal & take standard for state, have for at least 4 years.
We are in NY. Check to see if you need to itemize state before getting too worked up.
We can do that in my state too. But we cannot take standard for Federal and itemize for State under current law. To itemize for State, we have to itemize for Federal. And the latter combination would give us the lowest total income tax bill.
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Re: Tax Bill Omnibus Thread

Post by WoodSpinner »

VictoriaF wrote: Thu Dec 21, 2017 4:09 pm After thinking about the implications of the new tax rules, I came up with the following logic:

The termination of Roth Recharacterization strengthens Backdoor Roth:

1. Roth Recharacterization was required for those who had exceeded the annual Roth Conversion limit.
2. Since 2010, the limit on Roth Conversions has been removed, and thus the need for Roth Recharacterization has disappeared.
3. After 2010, Roth Recharacterization was used to hedge one's portfolio performance: do Roth Conversion for more than you need and then Recharacterize back to Traditional IRA whatever has performed the worst.
4. Starting in 2018, Roth Recharacterizations will not be allowed.

5. Conclusion: There will be no limits on Roth Conversions. Backdoor Roth is here to stay.

Victoria
Minor quibble, Roth Recharacterizatin of a contribution is still allowed.

Recharacterization of a conversion will be prohibited starting 2018.

:beer
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Re: Tax Bill Omnibus Thread

Post by The Wizard »

VictoriaF wrote: Sat Dec 23, 2017 1:55 pm
Nothing is permanent and monitoring the taxation law is an excellent habit. My point is that they canNOT have both:
(1) Roth conversion limits and
(2) prohibition of Roth recharacterization.

If they impose Roth conversion limits they will need to allow Roth recharacterization for those who will have made a mistake.

Victoria
That's an excellent point.
I wonder how they will resolve that along with folks who Play The System?
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torius71
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Re: Tax Bill Omnibus Thread

Post by torius71 »

VictoriaF wrote: Sat Dec 23, 2017 1:55 pm
torius71 wrote: Fri Dec 22, 2017 9:01 pm
VictoriaF wrote: Thu Dec 21, 2017 4:09 pm After thinking about the implications of the new tax rules, I came up with the following logic:

The termination of Roth Recharacterization strengthens Backdoor Roth:

1. Roth Recharacterization was required for those who had exceeded the annual Roth Conversion limit.
2. Since 2010, the limit on Roth Conversions has been removed, and thus the need for Roth Recharacterization has disappeared.
3. After 2010, Roth Recharacterization was used to hedge one's portfolio performance: do Roth Conversion for more than you need and then Recharacterize back to Traditional IRA whatever has performed the worst.
4. Starting in 2018, Roth Recharacterizations will not be allowed.

5. Conclusion: There will be no limits on Roth Conversions. Backdoor Roth is here to stay.

Victoria
I think I understand your point, but I don't agree with the conclusion. As long as there are income limits on direct Roth contributions, I see this as a loophole and the evolution of the law doesn't change that interpretation. Previous budgets have proposed eliminating the ability to convert non-deductible contributions and I think that risk remains. I would still advise monitoring for future changes, especially those contributing after-tax to employer plans with hopes of converting upon termination of employment.
Nothing is permanent and monitoring the taxation law is an excellent habit. My point is that they canNOT have both:
(1) Roth conversion limits and
(2) prohibition of Roth recharacterization.

If they impose Roth conversion limits they will need to allow Roth recharacterization for those who will have made a mistake.

Victoria
I do understand your point and it’s helpful that you noted it. My only point was the evolution of tax law is often winding and while the elimination of recharacterizations for conversions does make future income limits unlikely, however I don’t believe the law needs to allow recharacterizations if conversions are eventually limited to pre-tax dollars.
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Re: Tax Bill Omnibus Thread

Post by The Wizard »

WoodSpinner wrote: Sat Dec 23, 2017 4:31 pm
Minor quibble, Roth Recharacterizatin of a contribution is still allowed.

Recharacterization of a conversion will be prohibited starting 2018.

:beer
It's not a MINOR quibble, it's significant.
It invalidates my reply of five minutes ago...
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Re: Tax Bill Omnibus Thread

Post by scrabbler1 »

KATNYC wrote: Sat Dec 23, 2017 4:08 pm
grabiner wrote: Fri Dec 22, 2017 11:26 pm
Leif wrote: Fri Dec 22, 2017 10:41 pm
rkhusky wrote: Fri Dec 22, 2017 2:17 am On another issue, I have seen people posting that they won’t be able to itemize anymore. That is incorrect. You can always itemize, even if the standard deduction is larger. I don’t know why you would want to, but you are free to do so.
If you are using tax software you still want to enter itemize information. This is so it flows to your state return. But, that will be a 2018 tax year issue.
Some states only allow you to itemize on the state return if you itemized on the federal return. If you live in one of those states, you might want to itemize on federal taxes even if you are slightly short of the standard deduction.

We itemize Federal & take standard for state, have for at least 4 years.
We are in NY. Check to see if you need to itemize state before getting too worked up.
Same here, Kat, most of the time. With the federal SD increasing a lot, I don't expect to be itemizing on my federal return again unless I have unusually large medical expenses. Most of my itemized deductions are SALT, and half of those are state income taxes which are not deductible on a state return, of course. They are well under the $10k cap, so that part of the new law is moot for me. The higher SD will put more distance between my federal itemized deduction and the federal SD than the state itemized deduction and state SD, so it is remotely possible (if I have a large med expense) to pierce the state's SD without piercing the federal SD. Barring a change in NY state tax law, I'd be in that odd bind others have written about regarding what to do.
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Re: Tax Bill Omnibus Thread

Post by VictoriaF »

The Wizard wrote: Sat Dec 23, 2017 4:43 pm
WoodSpinner wrote: Sat Dec 23, 2017 4:31 pm
Minor quibble, Roth Recharacterizatin of a contribution is still allowed.

Recharacterization of a conversion will be prohibited starting 2018.

:beer
It's not a MINOR quibble, it's significant.
It invalidates my reply of five minutes ago...
You are giving up too easily!

WoodSpinner's quibble points to imprecision of my wording but supports my bigger point:
- Recharacterization of contributions is allowed because there are limits on contributions. If you exceed the contribution limit you should be able to recharacterize.
- Recharacterization of conversions is not needed, because there are no limits on conversions. If you cannot exceed the limit, you don't need the means for recharacterization.

Victoria
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by chaser »

Does anybody know if this new tax law changes the rules for QEF (Qualified Electing Fund) elections for PFICs (Passive Foreign Investment Company) in regards for taxing gold/silver holdings as capital gains as opposed to collectables? (I own shares of The Central Fund of Canada.)

This treatment has been discussed before on this forum, like here:
viewtopic.php?t=147171
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by logiclife »

Any link to AMT calculator please?
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by munemaker »

KATNYC wrote: Fri Dec 22, 2017 4:32 pm ...job-related expenses like ...guns/ammunition for cops ...
Cops can deduct guns and ammunition as business expenses? Doesn't their employer provide? I am really surprised at this!
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by Spirit Rider »

munemaker wrote: Sat Dec 23, 2017 10:55 pm
KATNYC wrote: Fri Dec 22, 2017 4:32 pm ...job-related expenses like ...guns/ammunition for cops ...
Cops can deduct guns and ammunition as business expenses? Doesn't their employer provide? I am really surprised at this!
It depends on the department.

Most large departments tend to issue firearms and equipment and control everything, but the individual officer will very often pay for uniforms, belts, shoes etc...

In smaller departments it is not uncommon for officers to be able to/required to purchase their own firearm and equipment from approved lists. In departments that allow knives and backup firearms, those are almost always self-procured.

I doubt any individual officer is allowed to use any self-procured ammunition.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by crumbone »

logiclife wrote: Sat Dec 23, 2017 8:38 pm Any link to AMT calculator please?
I rolled my own. As of yet, there are none that I'm aware of.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by BusterMcTaco »

logiclife wrote: Sat Dec 23, 2017 8:38 pm Any link to AMT calculator please?
BusterMcTaco wrote: Fri Dec 22, 2017 6:33 pm I put together this graph of the MFJ tax brackets (green) versus AMT (blue, and the red segment is the exemption phase-out range) with a variable for your deduction (d). I hope I got the math right!

https://www.desmos.com/calculator/csqqhwbjsf
retiredjg
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Re: Tax Bill Omnibus Thread

Post by retiredjg »

retiredjg wrote: Thu Dec 21, 2017 5:20 pm
The Wizard wrote: Thu Dec 21, 2017 11:17 am
The Wizard wrote: Thu Dec 21, 2017 11:02 am
retiredjg wrote: Thu Dec 21, 2017 10:29 am
The Wizard wrote: Thu Dec 21, 2017 9:42 am With the old folks SD now being $13,600, I see no way of getting an additional $3600 itemized in a normal year...
Check the numbers - I think the old folks standard deduction (non-blind) will be $12,000 + $1,300 for singles and $24,000 + $2,600 for a couple.
It's actually $12,000 + $1600 for we elderly single folks, oddly enough...
Reference for that $1600 extra:
https://www.forbes.com/sites/kellyphill ... eform/amp/
That is what it says, but I think it is incorrect. It does not even make sense (to me) as written.

"If you are over age 65, blind or disabled, you can tack on $1,300 to your standard deduction ($1,600 for unmarried taxpayers)."

This will all get sorted out in a few days though.
Oblivious Investor's blog makes it clearer to me and it appears your "$12,000 + $1600 for we elderly single folks" is what he came up with as well.....$1,600 additional SD for a single person and $1,300 additional SD for each person in a married couple.

I guess that the Kitces blog was written before this change was made, because he refers to the old number ($1,250) for everyone single or married.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by pshonore »

Current deduction for tax year 2016 is 1250 each MFJ /1550 Single. Believe each of those got raised $50 by inflation for 2017. No change resulting from tax bill except for the "base" of course ($24K)
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by retiredjg »

pshonore wrote: Sun Dec 24, 2017 12:05 pm Current deduction for tax year 2016 is 1250 each MFJ /1550 Single. Believe each of those got raised $50 by inflation for 2017. No change resulting from tax bill except for the "base" of course ($24K)
I did not find it in the tax bill either. What you are saying makes sense though. However, I can find nothing that indicates that $50 raise for inflation for the additional SD for old age or blindness. Not that it matters much - we'll find out when our tax software tells us a year from now!

I'm guessing Kitces was so overwhelmed getting that info together that he simply failed to designate MFJ vs single in his article.
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Re: Tax Bill Omnibus Thread

Post by hoppy08520 »

Carl53 wrote: Thu Dec 21, 2017 8:35 pm
hoppy08520 wrote: Thu Dec 21, 2017 7:23 pm Glad I'm reading this thread.

Like many people, I make various charitable donations that are be deductible. In 2017 and earlier, my spouse and I (MFJ) were itemizers, but starting with 2018, I forecast that we will be right on the edge of itemizing vs taking the almost-doubled standard deduction.

Therefore, I think we will start bunching our charitable donations every other year, to be able to itemize to our benefit in the years that we make the donations, and on the off years, take the standard deduction.

I was going to make a large (for me) charitable gift at the end of this year, but with the higher standard deduction for the 2018 tax year, I'll wait until early 2019.

I'm also going to see if I can pre-pay my 2018 county property taxes before the end of the year, since we are over the $10,000 SALT cap. If I can manage to make this happen, that alone will save me around $2,000 in taxes
You might still want to make the charitable gift this year. Unless your income is rising the lower brackets in 2018 and beyond will reduce the value of the later charitable deduction, not to mention that it is likely that more of the deduction will be wasted just overcoming the standard deduction limit.

Think of the deductions you will have each of the next three years. Lets say you only get the standard deduction of 12800, 24000 and 24000 with marginal tax rates of 15, 12 and 12. Standard deductions would save 1920, 2880 and 2880 over the next three years. If your itemized deductions would have been 12800 each year, then an additional 10000 charitable deduction in year one would save 1500, while doing nothing in either of the latter two years. You mention bunching. We've done it several times, but the higher standard deduction will likely price us out of doing so. If you already have 24000 in itemized deductions each year, then doing it in year one still saves 1500 while later years but 1200.
Carl53, you're right, thank you! I must have had some error in my spreadsheet, or mixed something up, and in making another analysis I found that if we make the donation in 2017 (compared to 2018), then minimize donations in 2018 but bunch them up in 2019, then we are in fact better off that way. Thanks for pointing that out!

So, I've now prepaid my 2018 county real estate tax in 2017 (seeing as it would get wasted with the $10,000 SALT cap in 2018), and front-loaded some charitable donations in 2017 that I would have made in 2018 if not for the new tax changes.
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Re: Tax Bill Omnibus Thread

Post by torius71 »

cherijoh wrote: Thu Dec 21, 2017 1:03 pm
whodidntante wrote: Wed Dec 20, 2017 10:47 pm – Flexibility To Roll Over 401(k) Loans After Termination. One of the big “risks” of taking a loan from a 401(k) plan is that many plans require that the loan be immediately repaid if the employee separates from service (or face adverse tax consequences). And may even require repayment if the plan terminates (e.g., the employer goes out of business). Under TCJA, though, a “qualified plan loan offset” amount for a terminated 401(k) loan is eligible for rollover within 60 days, essentially providing an (ex-)employee more time to repay the loan (directly into a rollover IRA) to avoid the tax consequences of non-repayment.

:happy :beer
I'm not sure many companies were Draconian enough to require immediate repayment of loans. My Megacorp already gave employees 60 days to repay a 401k loan.

If you are leaving the job because of a layoff, I'm not sure that guaranteeing a 60-day repayment window eliminates the risk you describe in your post.
Is that description from Kitces correct? The text below is from the conference agreement and I interpret to mean that taxpayers now have until the date their individual tax return is due to rollover the loan balance. Am I missing something?
...the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution is extended from 60 days after the date of the offset to the due date (including extensions) for filing the Federal income tax return for the taxable year in which the plan loan offset occurs, that is, the taxable year in which the amount is treated as distributed from the plan.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by MrDogg »

Does the new tax bill change the capital gains calculation on the sale of your personal residence? Under the old rules the first $250K ($500K if married filing jointly) of capital gains was excluded from tax and you could spend the money on anything (did not have to spend it on a new personal residence).
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by LadyGeek »

torius71 wrote: Sun Dec 24, 2017 1:03 pm
cherijoh wrote: Thu Dec 21, 2017 1:03 pm
whodidntante wrote: Wed Dec 20, 2017 10:47 pm – Flexibility To Roll Over 401(k) Loans After Termination. One of the big “risks” of taking a loan from a 401(k) plan is that many plans require that the loan be immediately repaid if the employee separates from service (or face adverse tax consequences). And may even require repayment if the plan terminates (e.g., the employer goes out of business). Under TCJA, though, a “qualified plan loan offset” amount for a terminated 401(k) loan is eligible for rollover within 60 days, essentially providing an (ex-)employee more time to repay the loan (directly into a rollover IRA) to avoid the tax consequences of non-repayment.

:happy :beer
I'm not sure many companies were Draconian enough to require immediate repayment of loans. My Megacorp already gave employees 60 days to repay a 401k loan.

If you are leaving the job because of a layoff, I'm not sure that guaranteeing a 60-day repayment window eliminates the risk you describe in your post.
Is that description from Kitces correct? The text below is from the conference agreement and I interpret to mean that taxpayers now have until the date their individual tax return is due to rollover the loan balance. Am I missing something?
...the period during which a qualified plan loan offset amount may be contributed to an eligible retirement plan as a rollover contribution is extended from 60 days after the date of the offset to the due date (including extensions) for filing the Federal income tax return for the taxable year in which the plan loan offset occurs, that is, the taxable year in which the amount is treated as distributed from the plan.
If I interpret your comment correctly, search for "SEC. 13613. EXTENDED ROLLOVER PERIOD FOR PLAN LOAN OFFSET AMOUNTS." in the actual legislation.

See: H. R. 1 (Enrolled-Bill) This is a hyperlinked text document which has clickable links to the impacted US Code section: - it may take a while to load in your browser.

FYI - If you were impacted by 2016 storm damage, search for this section "SEC. 11028. RELIEF FOR 2016 DISASTER AREAS.", as it relates to "Special Rules For Use Of Retirement Funds With Respect To Areas Damaged By 2016 Disasters."
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by Isabelle77 »

My husband's company offers a Roth 401K option that he's never taken advantage of because we have always assumed our tax rate now is the highest it will ever be and the traditional 401K helps reduce our taxable income. But now I'm wondering if we should take advantage of these years at 24% and do the roth 401K? Thoughts?
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by retiredjg »

Isabelle77 wrote: Sun Dec 24, 2017 3:23 pm My husband's company offers a Roth 401K option that he's never taken advantage of because we have always assumed our tax rate now is the highest it will ever be and the traditional 401K helps reduce our taxable income. But now I'm wondering if we should take advantage of these years at 24% and do the roth 401K? Thoughts?
It is a reason to consider using some Roth, but I don't think there is enough information to give a very reliable answer. There is a good chance that 24% will still be higher than you might pay in retirement. Many people, even very wealthy people, retire in the current 15% and soon to be 12% bracket. If you might be one of them, I would not use Roth 401k at 24%.
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Re: Please Post Tax Bill Questions Here [was Tax Bill Omnibus Thread]

Post by CAsage »

Isabelle77 wrote: Sun Dec 24, 2017 3:23 pm My husband's company offers a Roth 401K option that he's never taken advantage of because we have always assumed our tax rate now is the highest it will ever be and the traditional 401K helps reduce our taxable income. But now I'm wondering if we should take advantage of these years at 24% and do the roth 401K? Thoughts?
You might want to consider what your income will be with two Social Security checks, plus RMD. When I look ahead (and it's totally a guess)... my SS plus RMD will exceed the 12% bracket for a single. If your pencil model shows that your projected income as a married couple (higher deductible, shared living is cheaper) is 12%, then see what will happen when one of you passes on and you are left with the single bracket - one SS, same IRA RMD. Just a thought - I'm converting every penny I can now at 24%, since a) these tax brackets are not permanent and b) lots of economic pressure to raise taxes in the future.
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