[2018 tax return - How does it compare to previous years?]

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primetime
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Re: Smaller tax refunds this year? Clear explanation please

Post by primetime »

pdavi21 wrote: Mon Feb 11, 2019 4:55 pm The numbers are completely pointless to look at until most if not all returns have been processed.
I would think that most of us have gotten our returns back or know what they are getting back. I got mine back on Jan 28 direct deposited into my account using olt.com

Fed tax withheld based on total 2017 wages (box 7 on 1040) was 20.04%
Actual fed tax paid (box 16 on 1040) taking 2017 fed return into account and subtracting that from box 16 works out to be 13.99%
Filed jointly, itemized deduction

Fed tax withheld based on total 2018 wages (box 7 on 1040) was 17.72%
Actual fed tax paid (box 16 on 1040) taking 2018 fed return into account and subtracting that from box 16 works out to be 12.27%
Filed jointly, standard deduction

No kids. Wife doesn't work. I make 6 figures but I didn't quite make $165k in wages either year. 3% difference in pay between 2017 and 2018 and more of a bonus resulted in making $6300 more in wages in 2018.
So taking the returns into account, I paid roughly 1.72% less in taxes than I did last time and that’s with having $6300 more in wages.

Is it only people filing jointly where only one spouse works that are seeing the small tax benifit? [OT comment removed by admin LadyGeek]
Last edited by primetime on Tue Feb 12, 2019 8:05 pm, edited 1 time in total.
scrabbler1
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Re: [2018 tax return - How does it compare to previous years?]

Post by scrabbler1 »

Single, no kids, in New York (State, not City).

I am an early retiree, so I have no withheld taxes. I control what I owe in April because it is the difference between what I believe I will owe as of early January and what I pay in estimated taxes in early January.

My taxable income will be about 1.5% higher than it would have been using the old law. This is because the old Personal Exemption + Itemized Deduction is slightly higher than the new Standard Deduction ($12k). IOW, losing the PE hurts me more than the new, higher SD.

Nearly all of my income is either investment income or ordinary income in the unchanged 10% bracket. Only a small sliver of my ordinary income is taxed at the new 12% rate. Furthermore, some of my 0% investment income gets pushed into the 15% bracket under the new law.

So, all of this taken together boosts my tax bill by just over 4%.

Then there is the added nuisance of the new forms and schedules. While I do lose Schedule A because I won't be itemizing this year, I have to include 3 new schedules, 1, 2, and 5. Schedules 2 and 5 each show one number, repeated one, while Schedule 1 shows two numbers and their sum. And I am not allowed to cut off the bottom part of those mostly blank pages.

I already have to include Schedules B and D as well as Forms 8949 and 8962. This expands my return to 8 pages. That will make for one pretty stuffed envelope.
PinotGris
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Re: Tax 2018: Shock and Awe

Post by PinotGris »

Chicago60 wrote: Tue Feb 12, 2019 4:58 pm
PinotGris wrote: Tue Feb 12, 2019 1:38 pm
Chicago60 wrote: Tue Feb 12, 2019 12:56 pm You were in the 33% bracket, and now are in the 24% bracket, and you do not need to complete any forms other than the 1040?
On TurboTax all the information on other forms/schedules/etc filter down to 1040. We don't do our taxes by hand, it is electronic. Yes, we have to attach those form when we eventually mail all the papers to IRS and State. I am not sure I understand your question.

Yes I was slightly exaggerating about the size. I printed the 1040 alone and was quite surprised at how few line items were there and all fits into the bottom half. We still have few things to enter but they are minor and they are still trickling in.

Is anyone else using TurboTax and feel comfortable with what it is doing?
My question was because you implied that you only needed to complete the "postcard" size of the tax form, when, in fact, you actually did have to complete other forms and schedules. I doubt there are many people in the 24% tax bracket who do not need to complete more than just the 1040 without also completing the many forms and schedules. Since you filed electronically, I am not sure why you pointed out the (false) promise that taxpayers can just file a "postcard" size 1040.
I don't think I did any such thing. And I have clarified what I meant.. When I printed out our 1040 I was surprised how simple it looked compared to previous years of jumbled mess of adding and subtracting lines. Also in TurboTax you can drill down to the underlying calculations for each line.
Sorry if it confused you.
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munemaker
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Re: Smaller tax refunds this year? Clear explanation please

Post by munemaker »

Seasonal wrote: Mon Feb 11, 2019 4:40 pm
If withholding were the same and they're getting smaller refunds, then it would seem they're paying more taxes.
Thing is, withholding is lower, so people owe more (or receive smaller refunds) when they file. They still can come out ahead. Seems like a lot of people, even some Bogleheads, get confused over the difference between what you pay in taxes overall, and how you settle up when you file.

To me, it is not really when you pay, it is how much you pay in total.
primetime
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Re: [2018 tax return - How does it compare to previous years?]

Post by primetime »

The only calculation that matters is how much did you pay in taxes after taking your refund into account. What % based on your total yearly wages was paid? Compare 2017 vs 2018.
thx1138
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Re: [2018 tax return - How does it compare to previous years?]

Post by thx1138 »

Haven't completed the return yet as all forms are not yet available (8606 missing until mid-Feb) on tax prep software (we use free fillable forms). Also I will never file taxes before mid-March ever again due to corrected 1099s showing up in the past.

That said we are dual income one kid in a high tax state with mostly W-2 income and a smidge of 1099 DIV/INT. We will take the standard deduction due to the SALT limit and lose the exemption for the kid but the combination of the lower tax rates and the increased and now eligible child tax credit will offset that resulting in us owing just a little bit less than before. We were slowly creeping up on the AMT so the elimination of that threat will potentially help in the future.

Adjusted withholding due to the new tables early in 2018 so likely we will come in close. Every year was a bit hit or miss in the past though we typically paid a little on federal and got a little back on state. I usually aim to owe a bit of money at tax time and don't like getting large refunds. I figure this year we might miss by more than usual as I didn't obsess on setting the withholding.

The idiotic shortened 1040 with added schedules is a minor annoyance as I always print hard copies and like to review hard copies which is now harder but as far as actual filing goes that is electronic.
passiveTiger
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Re: [2018 tax return - How does it compare to previous years?]

Post by passiveTiger »

My total amount of federal income tax was reduced by 15% in 2018 from the 2017 amount with no change in taxable income. I owe approximately 9.5% of the total tax amount that I will pay on April 15.

I do not understand refunds. I carefully manage my withheld amount to ensure that I receive a relatively modest short-term interest-free loan from the federal government without an underpayment penalty instead of providing one to the federal government.

If your income arrives during the year in uneven amounts, you can keep withholding low and make quarterlies to ensure 90% or more of the tax is paid. You can easily account for capital gains throughout the year this way.

I am not certain why line 15 on the new 1040 should be a surprise.
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munemaker
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Re: Smaller tax refunds this year? Clear explanation please

Post by munemaker »

Seasonal wrote: Mon Feb 11, 2019 4:40 pm
livesoft wrote: Mon Feb 11, 2019 4:35 pm First of all, more than 40% of American families do not pay any income taxes.
Any income taxes or any federal income taxes?
This was from 2015:
The Tax Policy Center has updated its estimate of the percentage of households that will not pay federal income tax this year. We now figure it is 45.3 percent,


reference: https://www.forbes.com/sites/beltway/20 ... 1b31a261cb

[To optimize our ObamaCare subsidies, we are one of these households (for a few years). We do pay state income tax, but in PA it is only 3.07%.]
Bacchus01
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Re: Smaller tax refunds this year? Clear explanation please

Post by Bacchus01 »

primetime wrote: Tue Feb 12, 2019 6:32 pm
pdavi21 wrote: Mon Feb 11, 2019 4:55 pm The numbers are completely pointless to look at until most if not all returns have been processed.
I would think that most of us have gotten our returns back or know what they are getting back. I got mine back on Jan 28 direct deposited into my account using olt.com

Fed tax withheld based on total 2017 wages (box 7 on 1040) was 20.04%
Actual fed tax paid (box 16 on 1040) taking 2017 fed return into account and subtracting that from box 16 works out to be 13.99%
Filed jointly, itemized deduction

Fed tax withheld based on total 2018 wages (box 7 on 1040) was 17.72%
Actual fed tax paid (box 16 on 1040) taking 2018 fed return into account and subtracting that from box 16 works out to be 12.27%
Filed jointly, standard deduction

No kids. Wife doesn't work. I make 6 figures but I didn't quite make $165k in wages either year. 3% difference in pay between 2017 and 2018 and more of a bonus resulted in making $6300 more in wages in 2018.
So taking the returns into account, I paid roughly 1.72% less in taxes than I did last time and that’s with having $6300 more in wages.

Is it only people filing jointly where only one spouse works that are seeing the small tax benifit? [OT comment removed by admin LadyGeek]

Most have gotten them back? No. Most people haven’t even filed yet. I don’t know a single person who has filed yet.
Chicago60
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Re: Tax 2018: Shock and Awe

Post by Chicago60 »

PinotGris wrote: Tue Feb 12, 2019 7:09 pm
Chicago60 wrote: Tue Feb 12, 2019 4:58 pm
PinotGris wrote: Tue Feb 12, 2019 1:38 pm
Chicago60 wrote: Tue Feb 12, 2019 12:56 pm You were in the 33% bracket, and now are in the 24% bracket, and you do not need to complete any forms other than the 1040?
On TurboTax all the information on other forms/schedules/etc filter down to 1040. We don't do our taxes by hand, it is electronic. Yes, we have to attach those form when we eventually mail all the papers to IRS and State. I am not sure I understand your question.

Yes I was slightly exaggerating about the size. I printed the 1040 alone and was quite surprised at how few line items were there and all fits into the bottom half. We still have few things to enter but they are minor and they are still trickling in.

Is anyone else using TurboTax and feel comfortable with what it is doing?
My question was because you implied that you only needed to complete the "postcard" size of the tax form, when, in fact, you actually did have to complete other forms and schedules. I doubt there are many people in the 24% tax bracket who do not need to complete more than just the 1040 without also completing the many forms and schedules. Since you filed electronically, I am not sure why you pointed out the (false) promise that taxpayers can just file a "postcard" size 1040.
I don't think I did any such thing. And I have clarified what I meant.. When I printed out our 1040 I was surprised how simple it looked compared to previous years of jumbled mess of adding and subtracting lines. Also in TurboTax you can drill down to the underlying calculations for each line.
Sorry if it confused you.
I was not confused in the least. I simply responded to your inquiry as to why I asked the question. I answered--even though I saw later you did try to clarify it. I am confident that you know that the new form with all of its schedules and forms is no easier than prior years. But, it made a nice sound bite for those who fell for it.
Tamales
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Re: Smaller tax refunds this year? Clear explanation please

Post by Tamales »

livesoft wrote: Mon Feb 11, 2019 4:35 pm First of all, more than 40% of American families do not pay any income taxes.

Second, a tax refund is not the amount of taxes that one pays. It is pretty clear that many people do not know the difference between the taxes they pay and the amount of their tax refund.

Third, quite a number of families in the high population states such as NY and CA will have their deductions for state and local taxes limited when they have enough deductions to itemize and be above the standard deduction. This alone does not mean higher taxes, since tax brackets went lower, but it might. Note that national news outlets are often based in NY and CA, so it is easy for them to find taxpayers who paid more in Federal income taxes.

... and many other explanations to follow ....

I live in Texas. I paid higher taxes because bunching of deductions in my personal situation under the old rules was very good to me, but is prevented with the new rules.
Somebody on this forum--I can remember who :wink: developed a tax metric called adjusted livesoft income, and divided into your federal tax liability would give you a percentage to compare to prior years. That would be a more meaningful comparison than refund amount. Maybe somebody could provide a link to that...
Johnny Thinwallet
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Re: [2018 tax return - How does it compare to previous years?]

Post by Johnny Thinwallet »

Our 2018 AGI was $6,000 higher than our 2017 AGI, however, our overall 2018 tax burden was $550 less than our overall 2017 tax burden despite the extra $6,000 income. Out the door, this was a pretty nice tax break for us.

We're MFJ with one child and we took the standard deduction in both 2017 and 2018.
livesoft
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Re: Smaller tax refunds this year? Clear explanation please

Post by livesoft »

Tamales wrote: Tue Feb 12, 2019 8:49 pmSomebody on this forum--I can remember who :wink: developed a tax metric called adjusted livesoft income, and divided into your federal tax liability would give you a percentage to compare to prior years. That would be a more meaningful comparison than refund amount. Maybe somebody could provide a link to that...
I was thinking about that today. All the lines numbers are probably changed, so figuring things out would be a pain. Here is the link:
viewtopic.php?t=163748

Some of the effective tax rates posted in this 2019 thread are simply unbelievable to me.
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MtnBiker
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Re: Smaller tax refunds this year? Clear explanation please

Post by MtnBiker »

livesoft wrote: Mon Feb 11, 2019 4:35 pm I paid higher taxes because bunching of deductions in my personal situation under the old rules was very good to me, but is prevented with the new rules.
I haven't read through this entire thread but the quote above jumped out at me. Certainly bunching of deductions is less advantageous under the new rules, but what is preventing it from being used where applicable? I bunched 4 years of charitable contributions into 2018 which gave a nice itemized deduction. After the next 4 years are up, I will reach the age where QCDs will come into play.
livesoft
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Re: [2018 tax return - How does it compare to previous years?]

Post by livesoft »

If my annual State and local taxes are $12,000 and I bunch 2 years into 1 year, then under the old rules I got a $24,000 deduction (well over the standard deduction), but under the new rules, I get a $10,000 deduction (well under the standard deduction).

Yes, I could continue to bunch charitable donations, but I am not as magnanimous as perhaps I have led folks to believe. Under current tax laws, the first $14,000 of my charitable donations would not reduce my taxes at all, whereas pre-2018, the bunching of SALT would mean any and all of my charitable donations would reduce my taxes.
Last edited by livesoft on Tue Feb 12, 2019 9:57 pm, edited 1 time in total.
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rkhusky
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Re: [2018 tax return - How does it compare to previous years?]

Post by rkhusky »

Speaking of the new modularity of tax forms, the old versions have their issues too. I will have to file form 8606 in 2019 for the first time due to a Roth conversion. Why is that on a form about non-deductible IRA's? I will have to print out 2 full pages so that I can enter the 3 lines in Part II. They should have made it so you could submit page 2 independent of page 1.
livesoft
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Re: [2018 tax return - How does it compare to previous years?]

Post by livesoft »

rkhusky wrote: Tue Feb 12, 2019 9:56 pm Speaking of the new modularity of tax forms, the old versions have their issues too. I will have to file form 8606 in 2019 for the first time due to a Roth conversion. Why is that on a form about non-deductible IRA's? I will have to print out 2 full pages so that I can enter the 3 lines in Part II. They should have made it so you could submit page 2 independent of page 1.
Don't you have a printer that prints duplex (double-sided)?
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MtnBiker
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Re: [2018 tax return - How does it compare to previous years?]

Post by MtnBiker »

livesoft wrote: Tue Feb 12, 2019 9:57 pm Don't you have a printer that prints duplex (double-sided)?
Is the objective to save trees or octopi (ink)?
PinotGris
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Re: Tax 2018: Shock and Awe

Post by PinotGris »

Chicago60 wrote: Tue Feb 12, 2019 8:43 pm
I was not confused in the least. I simply responded to your inquiry as to why I asked the question. I answered--even though I saw later you did try to clarify it. I am confident that you know that the new form with all of its schedules and forms is no easier than prior years. But, it made a nice sound bite for those who fell for it.
First of all I was not trying to deceive anyone, if that is what you are implying. People who occupy this forum are a lot smarter than I am and do not get deceived easily.
I can only speak from my experience and it was very much easier than any previous years. I did not have to collect all our charitable contributions and list them into the software and look for taxes other than real estate we had paid since most of them weren't of use as deductions because of the change. We may still need them for the State Tax, I don't know. I am thrilled that we are not getting hit by AMT which was a big shock when it first happened. We are still working on our taxes as we have not received all the documents yet, so things may change.

I am not engaging in this useless dialog any more.
Daryl
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Re: [2018 tax return - How does it compare to previous years?]

Post by Daryl »

My taxes are down significantly over last year. I rent an apartment so I never had property taxes or mortgage interest that I could deduct in prior years. The major changes that impacted my return were the increased standard deduction and I'm in a somewhat lower tax bracket (marginal tax rate decreased modestly). My effective tax rate (social security wages on my W-2 / federal income tax liability) is somewhere around 7% (roughly equal to FICA tax).
GoPackGo
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Re: Smaller tax refunds this year? Clear explanation please

Post by GoPackGo »

munemaker wrote: Tue Feb 12, 2019 8:36 pm
Seasonal wrote: Mon Feb 11, 2019 4:40 pm
livesoft wrote: Mon Feb 11, 2019 4:35 pm First of all, more than 40% of American families do not pay any income taxes.
Any income taxes or any federal income taxes?
This was from 2015:
The Tax Policy Center has updated its estimate of the percentage of households that will not pay federal income tax this year. We now figure it is 45.3 percent,


reference: https://www.forbes.com/sites/beltway/20 ... 1b31a261cb

[To optimize our ObamaCare subsidies, we are one of these households (for a few years). We do pay state income tax, but in PA it is only 3.07%.]
From the article:
There’s another wrinkle: Our estimates count non-filers as paying no income tax but that’s almost certainly not right. Some may have had taxes withheld during the year that they could get back if they filed returns—or maybe wouldn’t get back if they in fact owed tax.
I mean, what are we really measuring at this point?
DrGoogle2017
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Re: [2018 tax return - How does it compare to previous years?]

Post by DrGoogle2017 »

I made a last minute Roth Conversion on top of what I did last year, so my tax is higher. What’s surprised me is the state tax got higher too compare to previous year. I still have to find out why.
Impromptu
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Re: [2018 tax return - How does it compare to previous years?]

Post by Impromptu »

My comparison will be hard, as midway through the year I moved from Illinois (4.95% income tax rate) to Washington (no income tax), and I took a much lower paying job to be near family. I paid social security taxes twice because of the new job, which is manifested as a large federal refund. SALT limitations would have affected me more had I stayed in Illinois. Elimination of AMT helps me.

Overall there will be a significant reduction in taxes paid, most due to my move and some due to the new tax laws.
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John151
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Re: [2018 tax return - How does it compare to previous years?]

Post by John151 »

I’m a retiree with a pension and investment income. In January 2018 I estimated what my taxes would be for the year and adjusted my withholdings accordingly. I was pretty darn close, off by small three-figure amounts. I also estimated what my federal income taxes would have been using 2017 rates: the tax cut saved me about fifteen percent.
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curiouskitty
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Re: [2018 tax return - How does it compare to previous years?]

Post by curiouskitty »

CA resident so predictably I paid more taxes. I no longer get to itemize which saves a few minutes but adds to my tax bill.

I also had a side business and went the lazy way as a sole proprietor. Big mistake as I didn’t qualify for the 20% rate and got destroyed on high tax rates plus self employment tax
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serbeer
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Re: [2018 tax return - How does it compare to previous years?]

Post by serbeer »

curiouskitty wrote: Wed Feb 13, 2019 12:37 am CA resident so predictably I paid more taxes. I no longer get to itemize which saves a few minutes but adds to my tax bill.

I also had a side business and went the lazy way as a sole proprietor. Big mistake as I didn’t qualify for the 20% rate and got destroyed on high tax rates plus self employment tax
What does solo proprietorship has to do with eligibility for 20% QBI deduction, which is what I assume you mean under 20% rate?
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catdude
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Re: [2018 tax return - How does it compare to previous years?]

Post by catdude »

2017: AGI = $48,428; tax = $3,603
2018: AGI = $51,113; tax = $4,445

Note that 2017 income includes a LT capital gain of $9,763 that (since I was in the 15% tax bracket) was federal tax-free.

In 2018 I did a Roth conversion of about $12,000 to use up available space in the 12% fed bracket...
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primetime
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Re: [2018 tax return - How does it compare to previous years?]

Post by primetime »

Despite the standard deduction going up to $12,000 for singles and $24,000 for married couples, the State And Local Tax (SALT) deduction cap of only $10,000 hurts individuals and couples who live in high cost of living areas around the country.

For example, the median home price in San Francisco is $1.5 million, resulting in a $18,000 a year property tax bill. This couple might also pay $30,000 in state income tax for a total of $48,000 a year. $38,000 of their $48,000 in taxes can no longer be deductible. Meaning they lose out on thousands of dollars in tax refund.
SGM
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Re: [2018 tax return - How does it compare to previous years?]

Post by SGM »

My tax preparation duties have become simpler. I will review my grown children's tax forms, but I will no longer enter any data for them. Poppa is available for consultation only. :D

I haven't received all my 1099s yet. Investment income is up. We have some LLC issues for rentals that I will consult with my accountant about. I will probably take an extension to figure everything out, so I cannot make a year to year comparison yet. Hopefully changes in AMT will help lower our effective tax rate.
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Re: [2018 tax return - How does it compare to previous years?]

Post by thx1138 »

DrGoogle2017 wrote: Tue Feb 12, 2019 11:00 pm I made a last minute Roth Conversion on top of what I did last year, so my tax is higher. What’s surprised me is the state tax got higher too compare to previous year. I still have to find out why.
If your federal deduction went down due to SALT limit then typically your state taxes will go up because the state tax rates didn’t change. For a lot of folks even though their federal deduction went down the new tax rates and child tax credit mean their federal stayed close to the same as before or went down a bit despite their deduction going down. But in many states you just see the reduced deduction without anything to offset it. Some states are expecting increased revenue due to this and some are trying to modify their tax code to account for the change.
Last edited by thx1138 on Wed Feb 13, 2019 6:17 am, edited 1 time in total.
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FiveK
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Re: [2018 tax return - How does it compare to previous years?]

Post by FiveK »

primetime wrote: Wed Feb 13, 2019 2:11 am Despite the standard deduction going up to $12,000 for singles and $24,000 for married couples, the State And Local Tax (SALT) deduction cap of only $10,000 hurts individuals and couples who live in high cost of living areas around the country.

For example, the median home price in San Francisco is $1.5 million, resulting in a $18,000 a year property tax bill. This couple might also pay $30,000 in state income tax for a total of $48,000 a year. $38,000 of their $48,000 in taxes can no longer be deductible. Meaning they lose out on thousands of dollars in tax refund.
It doesn't mean that at all.

Before we weep on this couple's behalf, let us note that in 2017 their AMT adder was ~$10K for a total federal tax ~$97K. In 2018 they pay no AMT and the lower bracket rates provide a total federal tax ~$81K.

Their refund at filing time of course depends on how much they withheld.
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FiveK
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Re: [2018 tax return - How does it compare to previous years?]

Post by FiveK »

thx1138 wrote: Wed Feb 13, 2019 5:33 am If your federal deduction went down due to SALT limit then typically your state taxes will go up because the state tax rates didn’t change. For a lot of folks even though their federal deduction went down the new tax rates and child tax credit mean their federal stayed close to the same as before or went down a bit despite their AGI having gone up. But on the state side you only see the increase in AGI but nothing to reduce that effect.
Note that neither the standard nor itemized federal deduction has any impact on AGI.
thx1138
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Re: [2018 tax return - How does it compare to previous years?]

Post by thx1138 »

FiveK wrote: Wed Feb 13, 2019 5:53 am
thx1138 wrote: Wed Feb 13, 2019 5:33 am If your federal deduction went down due to SALT limit then typically your state taxes will go up because the state tax rates didn’t change. For a lot of folks even though their federal deduction went down the new tax rates and child tax credit mean their federal stayed close to the same as before or went down a bit despite their AGI having gone up. But on the state side you only see the increase in AGI but nothing to reduce that effect.
Note that neither the standard nor itemized federal deduction has any impact on AGI.
You are absolutely correct of course, shouldn’t have said AGI. Posting first thing in the morning is dangerous! Edited post to clarify.
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Psyayeayeduck
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Re: [2018 tax return - How does it compare to previous years?]

Post by Psyayeayeduck »

This was the first year where I tracked my expenses, pay stubs, and the taxes I was expected to pay. It was a real eye opener as it showed me where all my money went -- federal and state taxes, FICA, pre-tax benefits, medical/dental/vision, etc. Every paycheck I recorded the amounts and compared it to what I was expecting at the end of 2018. After filing my tax return earlier this year, I ended up owing a net value of $14.

It was actually an enjoyable and educational experience that I'm now keeping track of my pay stubs on a permanent basis.
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Re: Smaller tax refunds this year? Clear explanation please

Post by MikeG62 »

MarkNYC wrote: Mon Feb 11, 2019 7:20 pm
As explained above by others, the change in withholding has a major effect on tax refunds. If total federal withholding was reduced by $2,000 for the year, and total federal tax went down by $1,500, all else being equal the tax refund will be $500 less than the prior year even though total federal tax went down.

Here is my general overview of the tax changes. Leaving aside the 199A deduction, there were 5 significant changes that in some combination affected all taxpayers. The first 3 benefit the taxpayer and the last 2 hurt the taxpayer: (1) reduction in tax rates, (2) increase in standard deduction, (3) effective elimination of AMT, (4) loss of exemption deductions, and (5) limit on SALT deduction.

For most taxpayers, the first 3 changes outweigh the last 2,resulting in a reduction in federal tax. For some, including a family of 4 making $120K - $150K, it's possible the last 2 changes outweigh the first 3, causing an increase in total federal tax.
^This. Could not have said it better myself.

Not sure why so many people forgot about the increase in their take-home pay that occurred in Feb/Mar of 2018 when the withholding tables were updated? I am sure those same people would have remembered had their take-home pay declined. :oops:
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TomatoTomahto
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Re: [2018 tax return - How does it compare to previous years?]

Post by TomatoTomahto »

I am going to see my CPA in a few hours. Doing a Y on Y comparison is going to be difficult, because there are 5 states involved, a ton of CG, etc, but I will try to model like to like on TurboTax when I get home.

The big question is whether SALT limits outweigh a slightly lower tax rate.
Okay, I get it; I won't be political or controversial. The Earth is flat.
Retired2013
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Re: [2018 tax return - How does it compare to previous years?]

Post by Retired2013 »

I know many people that believe they are itemizing on their tax returns because they take the shoe box of receipts to the tax prepare and he/she enters the information. When asked if they really itemized, they don't know. People really don't know how to even read a tax return that they are signing. Look at the bottom line? What's that!
jharkin
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Re: [2018 tax return - How does it compare to previous years?]

Post by jharkin »

RobLyons wrote: Mon Feb 11, 2019 4:30 pm So there seems to be much confusion around the tax returns this year. After watching news, scanning articles, and discussions with family/friends, it seems that many people are split on the cause of smaller tax returns this year.
Most of the articles I have seen online are people irate over smaller refunds... but who knows if their actual total tax was more or less.


My refund was a little bit positive4 this year( usually I owe) since I made up my own tool last year to calculate the effect of the new law and adjust my withholding and erred to the side of caution on my W4. I'm not surprised by the news reports since most in the general public dont have a clue, but I am rather surprised how many bogleheads in this thread got surprised on withholding....


As to my actual overal tax due - I am still waiting on some paperwork to finalize. However based on what I have so far, normalizing for the same income, it looks like net I am paying about $4000 less due to being eligible for the expanded tax credit (2 kids). Without that it would be nearly a wash - I lost deductions due to the salt cap but made back the difference in the lower marginal rates.
Last edited by jharkin on Wed Feb 13, 2019 8:42 am, edited 2 times in total.
Retired2013
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Re: [2018 tax return - How does it compare to previous years?]

Post by Retired2013 »

How crazy is this?

My refund was 9% HIGHER. Sounds great, like the government wanted. Higher refunds! I don't understand why people are getting lower refunds. :wink:

People only let you know what they want you to know.

Now the "partial" truth.

In 2017 I took $22k from my 401(k). Mandatory withholding of 20% = $4,400.
In 2018 I took $24k from my 401(k). Mandatory withholding of 20% = $4,800.
Tax Liability both years was $0.00 so full amount refunded. Hence $400 more refunded in 2019. 9% more!!! :greedy
Chicago60
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Re: Tax 2018: Shock and Awe

Post by Chicago60 »

PinotGris wrote: Tue Feb 12, 2019 10:18 pm
Chicago60 wrote: Tue Feb 12, 2019 8:43 pm
I was not confused in the least. I simply responded to your inquiry as to why I asked the question. I answered--even though I saw later you did try to clarify it. I am confident that you know that the new form with all of its schedules and forms is no easier than prior years. But, it made a nice sound bite for those who fell for it.
First of all I was not trying to deceive anyone, if that is what you are implying.
Sorry, but you misunderstood. I was not implying that you gave sound bites; I was suggesting that politicians in Washington did when they tried to sell the tax changes in 2017.
primetime
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Re: [2018 tax return - How does it compare to previous years?]

Post by primetime »

Retired2013 wrote: Wed Feb 13, 2019 8:23 am How crazy is this?

My refund was 9% HIGHER. Sounds great, like the government wanted. Higher refunds! I don't understand why people are getting lower refunds. :wink:

People only let you know what they want you to know.

Now the "partial" truth.

In 2017 I took $22k from my 401(k). Mandatory withholding of 20% = $4,400.
In 2018 I took $24k from my 401(k). Mandatory withholding of 20% = $4,800.
Tax Liability both years was $0.00 so full amount refunded. Hence $400 more refunded in 2019. 9% more!!! :greedy
Which is why I say for a real comparison, people need to look at box 7, box 16, and box 20a (or 22 if you owe) on their 1040 and figure out relative to wages in box 7, what % did they pay in taxes in 2017 vs 2018 after taking their refund into account and subtracting it from the amount in box 16 (or adding how much they owe to the amount in box 16).

This is a very simple % calculation and while you and I and most on here "get it", the fact that the masses don't get it is very disturbing.
retiredjg
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Re: [2018 tax return - How does it compare to previous years?]

Post by retiredjg »

This discussion is about to get a spanking from a moderator.... :twisted:
jeremyi
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Re: [2018 tax return - How does it compare to previous years?]

Post by jeremyi »

GoPackGo wrote: Wed Feb 13, 2019 7:46 am
primetime wrote: Wed Feb 13, 2019 1:31 am If the government really worked in the best interest of the people, there would be a flat tax and a flat sales tax on all goods regardless of state. Property tax would be reduced where applicable to account for the presence of a sales tax and state tax in places like NH which previously didn't have these taxes.

Why should only 40% of the people have to pay for services that 100% of the people use?
If you’re referring to the 40% estimate of prople who don’t pay federal income tax, read the Forbes article linked previously as there are a few flaws in how they are estimating that number. Also, it’s not like the people in that 40% aren’t paying any taxes at all. They are almost certainly paying sales tax, maybe state income taxes, and possibly property taxes. Aren’t the group paying no federal income tax doing so because they make less than the standard deduction? If you feel that group is getting some sort of benefit you would like, it seems you could join that group by reducing your income to $12k if a single filer or $24k if filing as a married couple.
No. Not necessarily.
They might pay $0 tax because they do some combination of: contributing to deductible IRAs, 401ks, or HSAs; paying student loan interest; claim a retirement saver's credit; claim an earned income credit; have children to claim the child tax credits.

My income is not huge, but it's well beyond $24k for MFJ and since 2010 my federal tax burden has been negative due to some combination of the items noted above.
3funder
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Re: Tax 2018: Shock and Awe

Post by 3funder »

munemaker wrote: Tue Feb 12, 2019 3:37 pm
3funder wrote: Tue Feb 12, 2019 3:12 pm My wife and I made out rather well; that said (and not to be political or anything), we didn't need a tax cut. Call it bittersweet.
Why would you make such a statement? Not sure how you evaluate need in this case. Does one "need" a salary increase or bonus, tax reduction or buying an item on sale? Personally I like more money rather than less, whether I need it or not.

You are not required to keep the tax cut. There is a provision for the government to accept contributions. https://www.treasurydirect.gov/govt/rep ... t/gift.htm

Or you can just give it to charity.

Having money you do not need is clearly a first world problem that would seem easy to remedy.
I love having more money; don't get me wrong. And no, I'm not donating it. What I'm saying is I never felt overtaxed to begin with. Also, lose the attitude. Do you live in a 3rd world country, or do you just assume I'm smarmy and rich? HInt: I'm neither -- I'm just comfortable and have little debt.
Last edited by 3funder on Wed Feb 13, 2019 10:05 am, edited 1 time in total.
dknightd
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Re: [2018 tax return - How does it compare to previous years?]

Post by dknightd »

I have not filed 2018 yet. But it looks like my total fed tax due will be higher than 2017. I expected that. I made some extra money this year. I will end up owing a little, but not enough to trigger a penalty.
In 2017 I itemized. In 2018 it looks like I will take standard deduction. Which is higher, but we no longer get personal exemptions, so that will be more or less a wash.
My marginal rate went down, but my effective rate stayed about the same (since I had more income that will be taxed at the marginal rate)

Next year, 2019, will be the tricky since I will likely have less income, and hence have less tax withheld than in 2018. I need to be careful I don't end up with a penalty. I hate penalties and fees ;)

This is a useful link for 2019 w4 tax planning
https://apps.irs.gov/app/withholdingcal ... /index.jsp
For now I'm not changing my w4, but will revisit later in the year.

I like not having a tax refund. I aim to have just enough withheld to pay what I owe.

edit: I don't like the asymmetrical way interest is handled on taxes. If you underpay, you pay interest. If you overpay, they do not pay interest. Doesn't seem fair to me . . .
Last edited by dknightd on Wed Feb 13, 2019 10:11 am, edited 1 time in total.
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SimonJester
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Re: [2018 tax return - How does it compare to previous years?]

Post by SimonJester »

My effective tax rate dropped 3% this year over last. I aim to owe a small amount every year and was able to accomplish this again for 2018.

Number of printed pages went up this year from 5 in 2017 to 11 in 2018. However I claimed an education credit this year so that added a few forms.
using my tax software was no different this year that past (adjusting to the education credits).

Acceptance of my E-File was almost immediate this year, I believe it took 10 minutes this year for the IRS to accept vs several hours last year, and a day or two in past years.

I am trying a new feature this year for paying my balance, Electronic Funds Withdrawal with E-File. So instead of writing a check the IRS is going to zap my bank account for the funds. Lets see how that works out :shock:

The 1/2 sheet "postcard" forms waste a lot of space / paper. I printed everything duplex to cut down on this...
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DWNY
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Re: [2018 tax return - How does it compare to previous years?]

Post by DWNY »

I continue to be amazed at the reports in the media. As many here have pointed at the focus is on smaller refunds with scant attention to whether or not tax liability decreased. Being curious and having my own tax spreadsheets for 2017 and 2018 it made it easy to check my own numbers.

single, no dependents, state income tax

2018 effective tax rate: 17.3%
2018 income with 2017 tax laws effective tax rate: 18.1%
$1560 less taxes under new tax law. Yahoo!

But, if I look at 2017 when I had an unexpected large capital gain then things look very different. I took the 2017 data with the 2018 tax law. Both 2017 and 2018 are subject to AMT.

2017 effective tax rate: 20.4 (including AMT, NIIT)
2017 income with 2018 tax laws effective tax rate: 20.8% (including AMT, NIIT)
$7563 more tax under the new tax law, This looks to be entirely due to the SALT cap. Effective tax rate (tax/taxable income) is a little misleading because the taxable income under the new tax law is quite a bit higher with the loss of SALT deduction.

My take away is that I'm glad the new tax law wasn't in place in 2017 but I'm happy to see it in 2018.

As for the new forms, I can only hope somebody realizes the forms need some optimization to get rid of all the blank space.
dknightd
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Re: [2018 tax return - How does it compare to previous years?]

Post by dknightd »

SimonJester wrote: Wed Feb 13, 2019 10:04 am
I am trying a new feature this year for paying my balance, Electronic Funds Withdrawal with E-File. So instead of writing a check the IRS is going to zap my bank account for the funds. Lets see how that works out :shock:
I've been doing this the last few years. So far no problems. But I admit I'm still a little nervous. I would hate to have them mistakenly take out more money than I owe. I imagine that could be a real nightmare. But I plan to do it again this year . . .
If you value a bird in the hand, pay off the loan. If you are willing to risk getting two birds (or none) from the market, invest the funds.
retiredjg
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Re: [2018 tax return - How does it compare to previous years?]

Post by retiredjg »

dknightd wrote: Wed Feb 13, 2019 10:00 am edit: I don't like the asymmetrical way interest is handled on taxes. If you underpay, you pay interest. If you overpay, they do not pay interest. Doesn't seem fair to me . . .
You don't pay interest if you underpay. It's free unless you underpay by too much and how much is "too much" is reasonably determined.

If you underpay by too much it's a penalty, not interest. Seems fair to me since underpayment is the fault of the taxpayer (except perhaps for this year :D )
retiredjg
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Re: [2018 tax return - How does it compare to previous years?]

Post by retiredjg »

SimonJester wrote: Wed Feb 13, 2019 10:04 am So instead of writing a check the IRS is going to zap my bank account for the funds. Lets see how that works out :shock:

The 1/2 sheet "postcard" forms waste a lot of space / paper. I printed everything duplex to cut down on this...
I've done this several times without a hitch. The exact amount on the exact day I requested.

Agree the forms are ludicrous. More forms, many of which are largely blank. The whole "postcard" idea was a smoke a mirrors sham. I hope this gets fixed.
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