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

Posted: Mon Feb 18, 2019 7:53 am
by scrabbler1
sawdust60 wrote: Sat Feb 16, 2019 12:40 am This is how I viewed the tax savings, with income and Roth conversions to the top of the 12% bracket, MFJ and 65+ standard deduction. The 2017 column uses same income and tax brackets, but applies higher rates. For 2018, more deductions and lower tax rates. Results are what I expected.

Image
If you have to use the QD and LTCG worksheet, then the comparison is a longer and messier. I do the taxes for myself and for 2 friends. One friend has investment income, so the comparison is longer and messier, like mine. But for the other friend, it's nice and quick and easy, like yours.

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

Posted: Mon Feb 18, 2019 9:26 am
by Escapevelocity
2018 Effective Federal Rate: 18.4%
2017 Effective Federal Rate: 18.3%

The big downer for me was that I owe the IRS $5,300 this year. I should have adjusted my withholding in January due to I was claiming extra exemptions to align with previous itemized deductions of $28K (NJ homeowner with SALT rubbed in my wounds). My employer HR department did not do me any favors by not warning about this.

My kids are too old now for child tax credit (17 and 19). My income was up about 25% in 2018 due to significant employer stock options exercise.

Last month, I adjust withholding to avoid this happening again next year.

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

Posted: Mon Feb 18, 2019 12:20 pm
by A440
FWIW...

('17) I owed $1500 Federal and got $1400 back on State.
('18) I owe $2500 Federal and get back $1000 for State.
However, I earned $9,000 more in '18 and had about the same amount withheld from my paycheck. I also added more to my 403b during the year by about $3,000.

The total amount of tax I paid (or will pay by 4/15) for Federal is $9,178 for an AGI of $122,535 filing Married Joint with 2 kids under college age. The standard deduction this year was $3,000 more than itemizing. Of the amount of AGI, $6,900 were dividends ($4,200 qualified) $916 in capital gains, the State refund from '17, and the rest salary.

Not sure if that is good, bad, or it is what it is??
As Arthur Godfrey once said, "I'm proud to pay taxes in the United States, the only thing is, I could be just as proud to pay half the money" :happy

I increased my 403b deductions for 2019 by $6,000, so hopefully that will help for next year's filing.

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

Posted: Mon Feb 18, 2019 1:30 pm
by Variant
Single, $214K income in 2018.

2017 - Total Federal Tax was ~$38K. Withheld $42.4K and refund was $4,508.
2018 - Total Federal Tax is ~$43.5K. Withheld $43.1K and owe $298.

Income increased by $17.2K (combination of increase in salary and dividends).

Federal deductions in 2017 were $36.6K, this year they're $20.8K.

I'm in California, so bit by SALT.

Re: Smaller tax refunds this year? Clear explanation please

Posted: Mon Feb 18, 2019 2:42 pm
by IMO
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.
Couldn't agree more on your post.

I thought it very odd when the "news" broke about people getting lower tax refunds this year, that there wasn't factual explanation of why the refund change amount had occurred. They could have also easily done typical examples of various incomes/marriage status/property taxes, etc to show the facts of the tax changes for those examples. Put politics aside, provide good reporting of the pertinent facts.

In the past I always remember how there was constant criticism of the ability of some taxpayers to itemize their deductions over those who couldn't itemize and were thus disadvantaged. With that definitive concern voiced in the past, wouldn't the limitations on SALT be helpful to address the past criticism/concern?

Re: Smaller tax refunds this year? Clear explanation please

Posted: Mon Feb 18, 2019 2:50 pm
by livesoft
IMO wrote: Mon Feb 18, 2019 2:42 pmIn the past I always remember how there was constant criticism of the ability of some taxpayers to itemize their deductions over those who couldn't itemize and were thus disadvantaged. With that definitive concern voiced in the past, wouldn't the limitations on SALT be helpful to address the past criticism/concern?
But that would be politics. By the same token, only the wealthy sending kids to private school or college can take advantage of 529 plans to get tax savings. The folks who don't have kids or who don't have kids going to college or who don't have enough income would be better off with tax credits.

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

Posted: Mon Feb 18, 2019 7:53 pm
by RandomPointer
Effective tax rates:
2017 - 14.52%
2018 - 14.88%

I don't think I am the target demographic for the recent tax cut.

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

Posted: Mon Feb 18, 2019 8:16 pm
by LadyGeek
It's not just the rate, but how much tax you actually paid. Was it more, less, or the same as 2017?

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

Posted: Mon Feb 18, 2019 9:35 pm
by mhc
Just finished my calculations:

2017:
33% bracket
effective rate 25.4% (taxes/taxable income)

2018:
35% bracket
effective rate 22.7%
AGI and taxable income $60k higher than 2017 (mainly W-2 income)
paid $3700 more in taxes in 2018

Itemized both years. 2018 SALT was $26k before being reduced to $10k. Hit with additional medicare tax and NIIT. New tax laws saved me a lot. AMT in 2017. No AMT in 2018.

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

Posted: Mon Feb 18, 2019 10:03 pm
by RandomPointer
LadyGeek wrote: Mon Feb 18, 2019 8:16 pm It's not just the rate, but how much tax you actually paid. Was it more, less, or the same as 2017?
I have to pay more. It is hard to make an apple to an apple comparison. My income went up.

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

Posted: Mon Feb 18, 2019 10:24 pm
by RandomPointer
RandomPointer wrote: Mon Feb 18, 2019 10:03 pm
LadyGeek wrote: Mon Feb 18, 2019 8:16 pm It's not just the rate, but how much tax you actually paid. Was it more, less, or the same as 2017?
I have to pay more. It is hard to make an apple to an apple comparison. My income went up.
I am looking at my spreadsheet, my income increases by X, but my taxable increases by 2.5X.

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

Posted: Mon Feb 18, 2019 10:36 pm
by drk
As expected, my tax obligation and effective tax rate both went down significantly (from 22% to 18%). My AGI was effectively the same, so the biggest factors were the marginal rate change from 28% to 24% and the increased standard deduction.

This year I’ll make more money and jump over the cliff into the 32% marginal rate.

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

Posted: Mon Feb 18, 2019 10:50 pm
by Ron
Adjusted Gross Income - $3761 less in 2018 vs 2017.
Tax Bracket - 22% 2018 vs 25% in 2017.
Effective Tax Rate - 10.63% in 2018 vs 13.67% in 2017.

In our case, being retired/debt free, we've taken the standard deduction for many years. The current SALT conflict is of no concern in our situation. Additionally, all retirement income (SS, pensions, SPIA, etc.) are tax free in our state.

In addition to the tax changes, we had over $10K of SS income tax free for the first time last year; paid on 85% of SS income with the top 15% untaxed. Just another reason to consider the delay SS until age 70, as we both did.

BTW, completed/transmitted our tax return via Turbo Tax on 2/9 and our refund was deposited to our bank the evening of 2/15

FWIW,

- Ron

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

Posted: Mon Feb 18, 2019 10:52 pm
by whodidntante
I just filed. My federal tax liability increased by $739 versus last year. This actually wasn't as bad as I had guessed it would be. My income increase was modest, so it was mostly deductions that got blown away. Oh well, at least I have some carryover losses from the tax loss harvesting gift of December 2018, whodidntante told himself.

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

Posted: Mon Feb 18, 2019 11:21 pm
by cantoque
Decrease in taxes paid for my family, but it is complicated.

California (high state tax) MFJ with four kids (lots of exemptions) means we used to be hit with AMT. The 10k SALT limit affects us now, but on AMT you get zero SALT deductions, so net win there. Child tax credit was also a big win, since AMT gives you nothing for having dependents.

In all, effective tax rate went 15% to 14.25% despite income increasing 10%. This doesn’t tell the whole story, because at the end of 2017, I saw that my marginal tax rates would go from 35% (AMT + phase out) to 24 or 32, so I pushed a bunch of charitable giving from 2018 to 2017. If giving had been even across the two years, effective tax rate would have gone 16% to 13.5%. But again, that drop is almost entirely due to AMT going away. If I do the same calculation assuming AMT didn’t exist in 2017, it would have gone 13.7 to 13.5%.

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

Posted: Mon Feb 18, 2019 11:34 pm
by Tamales
Haven't read the whole thread, but when people note their taxable income went up by x, keep in mind that compared to 2017 you no longer subtract off the 2017 line 42 exemption to arrive at your taxable income, and adjusted also for any difference between what your itemized deductions would have been vs the 2018 standard deduction. This has (can have) the effect of inflating your taxable income compared to 2017, without any actual direct income to show for it. But since the tax rates are generally lower you still may end up with a lower % tax obligation in 2018. I ended up 1.3% lower.

I had to go through all the itemized deduction entry anyway, because I needed federal schedule A to reduce my state taxes which still have a benefit from itemized over standard deduction.

I'd also note that I significantly increased my w4 withholding beginning around july and still owe federal (but at least no penalty even under the normal rules). I would have definitely owed a penalty under the normal rules if I had not done that.

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

Posted: Thu Feb 21, 2019 10:00 am
by munemaker
For the past two years, we have been keeping our taxable income low to maximize the ObamaCare subsidies.

2017:
MAGI - $45,501
Taxable income - $24,701
FIT (after Saver's Credit and Foreign Tax Credit) - $823

2018:
MAGI - $49,232
Taxable income - $23,932
FIT (after Saver's Credit and Foreign Tax Credit) - $0

We are now off of ObamaCare and on Medicare. During the next 5 years, we'll be doing serious Roth Conversions and our FICT will be in the area of $25,000-$30,000/year. That's quite a shift. The tax changes are really going to help us during the Roth conversion years, and we are really happy about that.

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

Posted: Thu Feb 21, 2019 4:04 pm
by MtnBiker
DWNY wrote: Wed Feb 13, 2019 10:06 am 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.
Is that the correct way to compute effective tax rate?

My taxes vary significantly year to year because of bunching of deductions. In 2017 I took the standard deduction and bunched SALT and charitable contributions into 2018 so as to be able to itemize. So there is no direct comparison to be made between 2017 and 2018 effective tax rates.

My effective tax rate (Tax/AGI) for 2018 is 5.0%.

If 2018 taxes were computed under the 2017 rules, the effective rate would instead be 4.2%. The higher 15% (vs 12%) marginal rate is more than compensated by taxable income being reduced $8.1K with personal exemptions added on top of itemized deductions.

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

Posted: Fri Feb 22, 2019 7:53 pm
by vtomar
2018 AGI up by 18%
Effective tax rate (tax/AGI) went down from 23.2% to 22.6%

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

Posted: Sat Feb 23, 2019 6:36 pm
by Random Poster
2018 income was $52,302 less in 2018 compared to 2017.

Effective tax rate in 2017 was 24.78%.

Effective tax rate in 2018 was 18.40%.

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

Posted: Sat Feb 23, 2019 7:26 pm
by Lynette
I haven't completed my taxes but I think one factor that will help me as a retiree taking RMDs is taking QCDs. In the past I itemized and included charitable deductions. This year I am taking the standard deduction as my charitable deductions are QCDs. Also I did not do anything stupid in taxable. In fact I did nothing - so no selling that would produce capital gains. I have pensions, SS, RMDs and taxable accounts. I did not change my withholding on my pensions or SS as I did not know the effect of the new law. I think I should get a refund. I see my accountant this week.

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

Posted: Sun Feb 24, 2019 3:50 am
by gas_balloon
CA resident, effective Federal taxes went up 4%, marginal bracket went from 33 -> 35%. Most of the difference is due to hitting the SALT deduction limit.

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

Posted: Mon Feb 25, 2019 11:40 am
by SC Anteater
CA resident. AGI went up about $3K this year, total tax due went up $4K. My effective tax rate (tax/AGI) for 2017 was 12.2% and for 2018 it was 14.1%

I did pay the 2nd 2017/2018 property tax installment in 2017 because I knew I would hit the SALT limit but that was only $4700. Pretty sure I came out worse in this tax reform.

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

Posted: Mon Feb 25, 2019 10:45 pm
by Winkdinkerson
Hawaii resident. Hit by SALT limitation, but effective tax rate is basically the same. 2017 effective federal tax rate was 18.40%. 2018 effective federal tax rate was 18.32%.

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

Posted: Tue Feb 26, 2019 3:13 am
by Dead Man Walking
Our pension income increased by $294 this year over last year. We made no adjustments to our W-4 for 2018 and simply allowed the retirement system to apply the new tax rates provided by the IRS. Our federal withholdings decreased by $1,454. We decided to use an accountant to prepare our 2018 return for several reasons related to our personal situation. We delivered our materials to the accountant yesterday. We received a refund last year. I’m curious to see what happens this year.

DMW

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

Posted: Tue Feb 26, 2019 5:23 am
by TwstdSista
I finally did our taxes, both under the new tax law and under last year's tax law. I originally thought we'd be saving about $3000, but I was wrong.

We saved $4000 - I love me the TCJA!

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

Posted: Tue Feb 26, 2019 8:14 am
by Gray
SALT: $34K
SALT Deduction: $10K

Used IRS withholding calc, but still owed $2K

(Thank God I didn’t use Intuit’s withholding calc!)

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

Posted: Tue Feb 26, 2019 8:39 am
by NotWhoYouThink
For my mom, with only SS income and IRA withdrawals, her taxes were down over 13% in 2018 from 2017 with virtually the same income.

She has itemized in past years but did not this year because of the higher over 65 deductible. Her medical bills and other deductions were about the same.

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

Posted: Tue Feb 26, 2019 8:56 am
by dsmil
We'll come out a couple hundred dollars ahead this year. The doubling of the child tax credit helps us more than the loss of the personal exemptions hurts us. We are itemizing even though we are at $21k of deductions, because if take the SD, we'd have to do the same on the MD state return, and the SD at the state level is woefully low.

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

Posted: Tue Feb 26, 2019 9:44 am
by TBillT
I do not know if anybody discussed Virginia.

For me, 2018 was my first year to try to do a significant Roth Conversion before Age 70 RMD's. I was encouraged by TCJA to take advanatge of 22% tax bracket.

However, each state handled TCJA differerntly, and Virginia was basically increasing my taxes in their version of "conforming". By around September 2018, I understood directionally what Virginia was doing. So that discouraged me from doing Roth conversion into 22% Fed tax bracket, and I kept my Roth Conversion in the 12% bracket.

Keeping income low in the 12% bracket, we surprisingly qualified for Medical Itemized Deductions for the first time.

So we had a relatively low tax year, by holding income lower. We are able to itemize despite SALT, which helped on state taxes. Next year we will not be so lucky as Medical is bumping up to 10% threshhold. So call 2018 a temporary close call on TCJA negative impacts for us.

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

Posted: Tue Feb 26, 2019 10:06 am
by michaeljc70
Though my AGI was similar in 2017 and 2018, the type of income was not so I don't view the numbers to be comparable. I had an effective tax rate of 0% in 2017 and 8% in 2018. The income in 2017 was mostly a non-taxable capital gain.

There seems to be a lot of false information floating around (I believe mostly due to a topic we cannot discuss here). The vast majority of people (like 90%) will pay the same or less taxes. I have heard people (not on Bogleheads, in real life) talking about the drop in refunds and incorrectly equating that with people paying more taxes.

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

Posted: Tue Feb 26, 2019 10:41 am
by jrbdmb
I'm disappointed that all of the media coverage I have seen on this issue focuses solely on the decrease in the average refund. Has anybody found any reporting on changes to the average Total Tax Due for 2018 returns vs. 2017 returns? Does the IRS supply this information, or do they think they are "simplifying" things by only supplying the average refund? :x

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

Posted: Tue Feb 26, 2019 11:14 am
by NotWhoYouThink
The reporting news cycle has been
- OH, no, refunds are lower!!! People are mad!!
- You knucklehead innumerate reporters, total tax bills are lower, less withholding caused the lower refunds!
- Guess what?? Your lower refund doesn't mean your taxes were higher, this is why!

But many individuals don't follow the news cycle, they just pay attention to their own personal situation, and many people never bother to learn anything about tax rates and brackets and withholding tables. They see a lower refund and get upset and vent. Noise.

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

Posted: Tue Feb 26, 2019 12:36 pm
by vitaflo
Gross income and taxable income exact same as 2017. 2017 itemized, 2018 did not. Taxes for 2018 are $10,000 less than 2017.

Effective tax rate:
2017: 24.5%
2018: 21.9%

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

Posted: Tue Feb 26, 2019 12:44 pm
by SmallSaver
Just curious what people are using to calculate their effective rate: federal income tax alone? Fed + state? Fed+state+SS+Medicare?

Using that latter our effective rate went from about 18% to 17%. Similar income, essentially all W-2.

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

Posted: Tue Feb 26, 2019 12:46 pm
by Thegame14
the amount of your return is meaningless, anyone saying I got less or more this year vs last doesn't understand how taxes work....your effective tax rate is what matters.

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

Posted: Tue Feb 26, 2019 1:21 pm
by MtnBiker
SmallSaver wrote: Tue Feb 26, 2019 12:44 pm Just curious what people are using to calculate their effective rate: federal income tax alone? Fed + state? Fed+state+SS+Medicare?
Since the title of the thread refers to 2018 tax returns and the context of the OP is the change in the federal tax code from 2017 to 2018, I think we should be calculating an effective tax rate for federal income tax alone.

Kitces has a write-up that talks of the definition of "effective tax rate." https://www.kitces.com/blog/understandi ... -use-each/

He says:
How do you calculate an effective tax rate? The formula for an effective tax rate is simply the individual’s total taxes paid, divided by total income. It represents a measure of the total tax burden that the client bears on all his/her income.

Notably, in practice the calculation of effective tax rates varies slightly, depending on what is used as a measure of “total” income. In some cases, the effective tax rate might divide the tax liability by total gross income. In other scenarios, practitioners may prefer to use Adjusted Gross Income (AGI), which allows for so-called above-the-line deductions that include many losses; as opposed to just tax deductions which reduce a liability, losses (from business losses to capital losses and more) arguably should be included to get a more accurate representation of an effective tax liability. Although notably, not all above-the-line deductions are losses; some are simply deductions, such as the one for 401(k) contributions.
So even the definition of effective federal tax rate varies.

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

Posted: Tue Feb 26, 2019 1:50 pm
by RickBoglehead
I just completed a relative's tax return using TurboTax 2018. I then took their 2017 return in TurboTax 2017, and changed the numbers to match 2018's numbers.

For 2018, they have a total tax bill of $5,695. Using the 2017 tax law, their bill would have been $5,270 or $425 (7.4%) lower.

This is a mid-80s retired single person with Social Security, dividends, interest, and capital gains.

Coincidentally, they paid $5,700 in estimated taxes (last year rounded up), and got a $5 refund.

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

Posted: Tue Feb 26, 2019 4:59 pm
by RiskyStocksPlanB
My federal tax amount was reduced by about 22%, from 77K to 60K.

This is with very similar tax situations in both years. The overall picture is: large family, high-ish income, upper midwest.

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

Posted: Tue Feb 26, 2019 5:18 pm
by Tamarind
Effective rate was just above 9% of gross income, or 12% of AGI. Last year my effective rate was around 17% of AGI. This is in spite of a sharp increase in income.

First year as MFJ and we were able to max out two 401ks, so that made a big difference. The marriage "bonus" is real. The increase in standard deduction also made a significant impact. In 2017 I itemized, fiancee did not. In 2018 I would not have itemized even if I'd still been single.

I did adjust our withholding during the year but we still ended up with a bigger refund than I wanted because I misjudged how withholding was done on DW's overtime pay. It may take another year or two to get it dialed in.

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

Posted: Thu Feb 28, 2019 1:43 pm
by sky jumper
Year____________2018_________2017
AGI____________307,749______297,196
Total Tax________51,882_______59,247
Effective Rate____16.8%_______19.9%
AMT______________0__________4,438

MFJ 2kids
$11k property tax
$13k state tax

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

Posted: Thu Feb 28, 2019 4:05 pm
by Elsebet
Last year we paid $300, this year we owe $2400 for Federal tax, no income tax in WA state. Our income went up quite a bit over last year. This is the first year in recent memory that we have been under the standard deduction, usually we are always over due to mortgage interest and property tax.

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

Posted: Thu Feb 28, 2019 4:23 pm
by azianbob
I am married, no kids, dual income, no house, no loans. We both are employed and get W-2, no personal business.
We went with the standard deduction of $24,000. Nothing really to itemize other than car registration, and charity (only a couple thousand).

We made $20k more in AGI in 2018 compared to 2017 but our effective tax rate decreased. I don't have the numbers with me now but I remember going "huh" when I finished with Turbotax this year and they provide you with the year over year analysis. Will update later with %s if I remember.

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

Posted: Fri Mar 01, 2019 12:25 am
by Dead Man Walking
Dead Man Walking wrote: Tue Feb 26, 2019 3:13 am Our pension income increased by $294 this year over last year. We made no adjustments to our W-4 for 2018 and simply allowed the retirement system to apply the new tax rates provided by the IRS. Our federal withholdings decreased by $1,454. We decided to use an accountant to prepare our 2018 return for several reasons related to our personal situation. We delivered our materials to the accountant yesterday. We received a refund last year. I’m curious to see what happens this year.

DMW
I have quoted my earlier post in order to answer your question specifically. Our federal income tax rate was about 2% lower than it was in 2017. I calculated our tax rate by dividing the taxes paid by our adjusted gross income. We have taken the standard deduction for several years; therefore, our tax situation only fluctuates due to interest, dividends, and capital gains or losses. We did have a small capital loss and a slight increase in interest and dividends. The refund was about 35% greater than last year because of adjustments we made to our W-4s several years ago - we had more taxes taken out because we had underpaid several years ago.

We certainly aren’t one percenters and probably aren’t much different than middle class taxpayers who have used the standard deduction. I feel for those who have mortgages and have high state and local taxes. [OT comment removed by admin LadyGeek]

DMW

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

Posted: Fri Mar 01, 2019 1:32 am
by Thesaints
We saved a bunch even after losing more than half of our deductions (CA residents). Marriage penalty was removed under 600k and AMT threshold raised.
A pity the Obamacare additional taxes were left in place; on some investments we pay close to a 50% rate.

Federal effective tax rate this year was a smidge under 20%. Unfortunately don’t have last years handy.

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

Posted: Fri Mar 01, 2019 1:18 pm
by azianbob
azianbob wrote: Thu Feb 28, 2019 4:23 pm I am married, no kids, dual income, no house, no loans. We both are employed and get W-2, no personal business.
We went with the standard deduction of $24,000. Nothing really to itemize other than car registration, and charity (only a couple thousand).

We made $20k more in AGI in 2018 compared to 2017 but our effective tax rate decreased. I don't have the numbers with me now but I remember going "huh" when I finished with Turbotax this year and they provide you with the year over year analysis. Will update later with %s if I remember.
Updating with actual numbers

I live in CA. I am married, no kids, dual income, no house, no loans. We both are employed and get W-2s, 1099-INT, no personal business.
We went with the standard deduction of $24,000. Nothing really to itemize other than car registration (like $400 for two cars) and charity (only a couple thousand).

We made $18k more AGI in 2018 compared to 2017. We actually paid $665 less in Federal tax this year however. CA tax went up by $2,087 but this was to be expected between our income increase and the fact CA doesn't let you deduct HSAs (We started HSA in 2018).

2017 effective tax rate - Fed 16.76%, CA 5.51%
2018 effective tax rate - Fed 14.74%, CA 5.88%

[OT comment removed by admin LadyGeek]

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

Posted: Sun Mar 03, 2019 10:11 pm
by RandomPointer
I took another look at my return. I made a mistake with form 8606 (backdoor Roth IRA). Instead of showing a backdoor Roth conversion, it showed taxable withdrawal. After correcting it, my taxes went up slightly from last year. The effective rate is actually goes down.

So, effective tax rate goes down 0.91%. My incomes went up by X, but my taxable went up by 2.5X. However, my tax bracket is lower than the previous year. So even though my taxable income went up, it was offset by being a lower tax bracket.

I am very curious to see how much taxes do I have to pay if there is no tax cut. If I have time, I would like to use last year tax return software to create a mock return using this year data.

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

Posted: Sun Mar 03, 2019 11:32 pm
by bottlecap
If your family has a high income and/or a lot of itemized deductions, sure, you might be paying are greater share under the new law. That's exactly how it was designed to work.

OP, given the income ranges of your friends, they are almost certainly mistaken. But there are multiple changes and several moving parts, so it is possible one of them might actually be paying a greater percentage of their income in taxes.

People tend to be hyperbolic about any change in tax law, especially when take news stories at face value and cement a perception that isn't based in fact. This is compounded by the fact that most people don't understand how taxes and withholding work.

But the bottom line is that income taxes have been around for a long time. They change every so often. Nowadays, free tax and withholding estimating software is published within weeks of such a bill becoming law. You figure it out and you pay what you pay.

How what you, your friends, or anyone on this forum paid this year compares to their tax bill previous years is irrelevant.

JT

So, I did my taxes over the weekend

Posted: Mon Mar 04, 2019 11:00 am
by marti038
[merged this post and its replies into the existing topic - moderator prudent]

I wasn't really sure how the changes in tax laws would effect us, so I knocked them out earlier than I normally would this year. In summary, MFJ with AGI of $189k. Between charitable gifts and mortgage interest, it was advantageous for us to itemize instead of using the new, larger standard deduction. From 2017 to 2018, very little changed in our federal tax bottom line, but the new tax laws were somewhat beneficial for us.

Here is our effective federal tax rate % over the last 4 years:

2015: 12.37%
2016: 12.12%
2017: 12.54%
2018: 10.89%

Overall, we have very basic taxes. Two W-2s and some interest income from savings. Sold no taxable investments in 2018 and received no dividends. We have one home, no businesses or other properties. Our taxable income is reduced by gifts to charity, state taxes, real estate taxes, mortgage interest, and 401k contributions (and some other small deductions).

The biggest question I had going in was how the elimination of personal exemptions would impact us. We deducted $16,200 in 2017 for exemptions, but we have two kids (4 & 6) and received $2000 each for them in credits in 2018. As a result, it was basically a wash for us ($16,200 in reduced income is basically $4000 in credits for the 25% bracket we were in in 2017).

Obviously there are a myriad of circumstances that will be different for everyone, but we're pretty vanilla so I thought this information might be of interest to some.

(Note: I used TurboTax to calculate my taxes.)

Re: So, I did my taxes over the weekend

Posted: Mon Mar 04, 2019 11:03 am
by barnaclebob
Our effective rate also went down about 2% from ~17% to ~15%. AGI was about 200k and we barely itemized; MFJ. My brother's effective rate stayed the same, AGI was about 75k filing single taking the std deduction.