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

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

Post by Alex Frakt » Wed Dec 20, 2017 1:18 pm

Normally we would not open discussion on new bills until they are signed into law. However, given that the new tax act has been approved by both houses and the short period of time left until the end of the year to make any changes, we will open this up for discussion now on this thread. Duplicate threads will be merged here until the bill is actually signed into law.

To the extent possible, let's focus on what should be done now. For example, it appears that it makes sense to make charitable donations for 2017 if the provisions of the act will have you switching from itemized to standard deductions in 2018.

[Note: title edited for clarity.]

I posted the following on page 13 of this thread, reposting below for anyone starting this thread now.
Please note that we are merging duplicate threads here. If something looks out of place, check the post title, it may be from a merged thread.

Another thing, we made an exception to our rule that laws must be enacted before they can be discussed in order to give people a chance to figure out if they need to take any actions before the end of the year. While we will not be moderating discussions that go beyond this issue, please keep in mind that not everything can be or need be answered now. Some of the issues presented, for example those on pass through entity deductions, may be better addressed once relevant experts and/or the responsible government agencies have a chance to read, digest and publish guidance on the text of the enacted law.

betablocker
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Re: Tax Act Omnibus Thread

Post by betablocker » Wed Dec 20, 2017 1:20 pm

Prepay your mortgage but the bill explicitly forbids deducting a 2018 SALT payment against 2017

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randomizer
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Re: Tax Act Omnibus Thread

Post by randomizer » Wed Dec 20, 2017 1:22 pm

Thank you Alex.
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treesrock
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Re: Tax Act Omnibus Thread

Post by treesrock » 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.

mffl
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Re: Tax Act Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:24 pm

I wanted to say thank you as well. I am in 100% agreement with the rules, but I appreciate the exception granted in this case.

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Re: Tax Act Omnibus Thread

Post by Nate79 » Wed Dec 20, 2017 1:24 pm

Here is a link to the text of the bill:

https://www.congress.gov/bill/115th-con ... ill/1/text

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Re: Tax Act Omnibus Thread

Post by oldcomputerguy » Wed Dec 20, 2017 1:25 pm

It's not clear whether the law actually will be signed before the end of 2017. Bloomberg reports that the President may wait until January to sign the law, to avoid triggering automatic spending cuts to Medicare and other programs.
White House National Economic Council Director Gary Cohn said Trump would sign the bill this year if Congress is able to pass a separate provision waiving automatic spending cuts as part of a year-end spending deal to avoid a government shut down before Friday. If not, Trump would sign the bill in early 2018, he said.

Under the so-called PAYGO law, automatic cuts to Medicare and other spending categories would be triggered by the tax bill in January because the bill is scored as increasing the deficit by $1.5 trillion over ten years. Waiting until January means that those cuts would be delayed until 2019, according to budget expert Ed Lorenzen of the Committee for a Responsible Federal Budget.
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Re: Tax Act Omnibus Thread

Post by harikaried » Wed Dec 20, 2017 1:26 pm

This was shared in the previous thread for some basic playing around with AGI and how the deduction/exemption/credit/rate changes affect the total federal income tax:

http://taxplancalculator.com/

In particular, for those who would have itemized, it might show that in 2018+, you will be taking the standard deduction, so as Alex pointed out, maybe donate to charity sooner in 2017. (But not prepay 2018 property taxes as those will be counted towards 2018 tax year and not be allowed for 2017.)

EddyB
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Re: Tax Act Omnibus Thread

Post by EddyB » Wed Dec 20, 2017 1:29 pm

betablocker wrote:
Wed Dec 20, 2017 1:20 pm
Prepay your mortgage but the bill explicitly forbids deducting a 2018 SALT payment against 2017
That prohibition only reaches to income taxes.

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Re: Tax Act Omnibus Thread

Post by Stormbringer » Wed Dec 20, 2017 1:31 pm

betablocker wrote:
Wed Dec 20, 2017 1:20 pm
Prepay your mortgage but the bill explicitly forbids deducting a 2018 SALT payment against 2017
Just to clarify:
Congress wrote:an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.
Prepaid property taxes, which are not income taxes, do not appear to be covered by the same provision.
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Re: Tax Act Omnibus Thread

Post by whodidntante » Wed Dec 20, 2017 1:33 pm

EddyB wrote:
Wed Dec 20, 2017 1:29 pm
betablocker wrote:
Wed Dec 20, 2017 1:20 pm
Prepay your mortgage but the bill explicitly forbids deducting a 2018 SALT payment against 2017
That prohibition only reaches to income taxes.
That is my understanding as well. Or sales taxes, but that's an either/or.

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:33 pm

It looks like the expanded standard deduction opens up a lot of opportunities for bunching.

For example, I think I'll hit the 10k SALT cap, plus 6k mortgage interest each year plus... that's basically it? I used to have a large mileage deduction but that appears to be absent from the new law. In my case the only additional deduction that I can bunch is my charitable contributions, which I can pay every odd year, and then take the standard deduction every even year now.

That said, I don't know if my business will count as a "service business" and/or whether the 20% pass through deduction will count only when itemizing.

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Re: Tax Bill Omnibus Thread

Post by Diogenes » 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?
I tried one on Marketwatch (below) and it appears I'll be getting a significant reduction, but I want to cross-check it and compare 2017/2018 side by side. Also tried the taxplancalculator.com site above, but since I've never heard of the author...
https://www.marketwatch.com/story/the-n ... 2017-10-26
Last edited by Diogenes on Wed Dec 20, 2017 1:45 pm, edited 2 times in total.

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alpenglow
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Re: Tax Bill Omnibus Thread

Post by alpenglow » Wed Dec 20, 2017 1:35 pm

I was planning to pay my full property tax bill in December to capture a better deduction. The bill in my municipality is cut December 1, 2017 and the town states:

"FIRST HALF PAYMENT DUE: Payable and Post marked January 10th without penalty. First and second payments may be paid at the same time prior to January 10th

SECOND HALF PAYMENT DUE: Payable and Post marked by May 31st without penalty."

As I read the law, I should be able to do this, correct? I am not pre-paying or making a deposit for a bill coming in 2018.

Quoted from another thread, cyclesafe said:
Section 11042 of the new tax bill states "For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.’’. This means that no state and local tax (SALT) tax imposed in 2018 (or later) is deductible in 2017 - only in 2018, even if paid ("as a deposit") in 2017 . This includes state income taxes and local income and property taxes.
Last edited by alpenglow on Wed Dec 20, 2017 1:36 pm, edited 1 time in total.

caseynshan
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Re: Tax Bill Omnibus Thread

Post by caseynshan » Wed Dec 20, 2017 1:36 pm

My personal situation/Strategy

Feel free to add constructive criticism.. might help someone else..

State Tax - 9k
Prop Tax - 3k
subtotal 12k (will be limited to 10k in 2018)
Mort Interest - 6k
charity -15k
---------
Total deductions 2017 - 33k
Total deductions 2018 - 31k

2018 - 31k more than 24k standard deduct.. so no need to bunch Charity. (I don't want to bunch all 30k/0k.. realistically would only bunch charity something like 26k/4k.. which wouldn't end up mattering.)

Can try to reduce SALT a little.. (I have held off on 529 contribution, and will hold that for 2018 which will reduce my State Tax)
Prepaying Mort Interest would not be helpful.. could try to prepay state tax.. but due to amount.. probably not worth confusion.


AMT not a concern

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Re: Tax Bill Omnibus Thread

Post by pshonore » Wed Dec 20, 2017 1:37 pm

1. Recharacterization of Roth IRA Conversions will be gone as of 1/1/18. Think you may still be able to undo a 2017 conversion next year until October, but don't take my word for it. No more doing multiple conversions and undoing the least profitable. I didn't think that was widespread and I'm surprised it got noticed

2. Kiddie tax income will now be taxed at Trust rates (not the parents rate)

letsgobobby
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Re: Tax Bill Omnibus Thread

Post by letsgobobby » Wed Dec 20, 2017 1:38 pm

At this point I don’t anticipate doing anything differently.

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onthecusp
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Re: Tax Bill Omnibus Thread

Post by onthecusp » Wed Dec 20, 2017 1:38 pm

Trying to decide if I should prepay real estate taxes this year due to higher marginal rates this year and higher std deduction next. I think it is a good idea but I guess now I can run the numbers to decide for sure. Real estate tax is high in Texas making up for the lack of a state income tax.
Last edited by onthecusp on Wed Dec 20, 2017 1:39 pm, edited 1 time in total.

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:38 pm

alpenglow wrote:
Wed Dec 20, 2017 1:35 pm
I was planning to pay my full property tax bill in December to capture a better deduction. The bill in my municipality is cut December 1, 2017 and the town states:

"FIRST HALF PAYMENT DUE: Payable and Post marked January 10th without penalty. First and second payments may be paid at the same time prior to January 10th

SECOND HALF PAYMENT DUE: Payable and Post marked by May 31st without penalty."

As I read the law, I should be able to do this, correct? I am not pre-paying or making a deposit for a bill coming in 2018.
I think the question will come down to whether the taxing entity considers it payment for 2017 taxes or 2018 taxes. I'd call and ask, but my guess is 2017 so you should be safe. For example, my jurisdiction taxes for the 2017 year, sends out the payment notices in May (!) and the due date is January 31 of the following year. There's a half pay option (pay half by Nov 30, then other half is due by June 30 following year), but in this case I think it's in my interest to pay this year, and I should be in the clear as it's for *2017* taxes, regardless of the due date structure.

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Smorgasbord
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Re: Tax Bill Omnibus Thread

Post by Smorgasbord » Wed Dec 20, 2017 1:38 pm

Well, it looks like 529 plans just got a whole lot more interesting:
TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”.
I for one am going to take a good look at upping my contributions for my preschool aged kids.

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sunny_socal
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Re: Tax Bill Omnibus Thread

Post by sunny_socal » Wed Dec 20, 2017 1:39 pm

Thanks for the calculator, looks like I'll be saving ~$3k next year :beer

Seasonal
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Re: Tax Bill Omnibus Thread

Post by Seasonal » Wed Dec 20, 2017 1:41 pm

Does this affect Roth conversion strategy or timing? I'd think the only issues would be that (1) the changes in tax brackets may change the amounts converted in 2018, etc. at the margins and (2) the elimination of Roth re-characterization may limit some cleverness, but am wondering if there are other implications?

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Re: Tax Bill Omnibus Thread

Post by JDCarpenter » Wed Dec 20, 2017 1:42 pm

pshonore wrote:
Wed Dec 20, 2017 1:37 pm
1. Recharacterization of Roth IRA Conversions will be gone as of 1/1/18. Think you may still be able to undo a 2017 conversion next year until October, but don't take my word for it. No more doing multiple conversions and undoing the least profitable. I didn't think that was widespread and I'm surprised it got noticed
...
I've been closely following this, as I converted with plans to partially recharacterize.... Wall Street Journal is indicating that recharacterizations for 2017 must be done by end of the year [But Kitces disagrees, and text of the Bill seems to support your thought on recharacterization of 2017 conversions, as discussed below:viewtopic.php?f=2&t=235146&start=50#p3673733 ]:
Taxpayers who did a conversion this year and are considering recharacterizing it must act by the end of 2017.


Probably paywalled, but here is link: https://www.wsj.com/graphics/taxes-investing/ (In "Retirees" section) Next stop is the Bill....

Edited to add bracketed material and link to my later post in this thread.
Last edited by JDCarpenter on Wed Dec 20, 2017 2:22 pm, edited 1 time in total.
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rrouse
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Re: Tax Bill Omnibus Thread

Post by rrouse » Wed Dec 20, 2017 1:42 pm

How does the 20% deduction for pass-through income interact with AMT? It seems like if you had to add the deduction back in, it would negate the benefit (then again, that seems to be the point of AMT).

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alpenglow
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Re: Tax Bill Omnibus Thread

Post by alpenglow » Wed Dec 20, 2017 1:43 pm

mffl wrote:
Wed Dec 20, 2017 1:38 pm
alpenglow wrote:
Wed Dec 20, 2017 1:35 pm
I was planning to pay my full property tax bill in December to capture a better deduction. The bill in my municipality is cut December 1, 2017 and the town states:

"FIRST HALF PAYMENT DUE: Payable and Post marked January 10th without penalty. First and second payments may be paid at the same time prior to January 10th

SECOND HALF PAYMENT DUE: Payable and Post marked by May 31st without penalty."

As I read the law, I should be able to do this, correct? I am not pre-paying or making a deposit for a bill coming in 2018.
I think the question will come down to whether the taxing entity considers it payment for 2017 taxes or 2018 taxes. I'd call and ask, but my guess is 2017 so you should be safe. For example, my jurisdiction taxes for the 2017 year, sends out the payment notices in May (!) and the due date is January 31 of the following year. There's a half pay option (pay half by Nov 30, then other half is due by June 30 following year), but in this case I think it's in my interest to pay this year, and I should be in the clear as it's for *2017* taxes, regardless of the due date structure.
Officially, the my property tax bill says, "Statement of taxes 2017-2018".

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:43 pm

caseynshan wrote:
Wed Dec 20, 2017 1:36 pm
My personal situation/Strategy

Feel free to add constructive criticism.. might help someone else..

State Tax - 9k
Prop Tax - 3k
subtotal 12k (will be limited to 10k in 2018)
Mort Interest - 6k
charity -15k
---------
Total deductions 2017 - 33k
Total deductions 2018 - 31k

2018 - 31k more than 24k standard deduct.. so no need to bunch Charity. (I don't want to bunch all 30k/0k.. realistically would only bunch charity something like 26k/4k.. which wouldn't end up mattering.)

Can try to reduce SALT a little.. (I have held off on 529 contribution, and will hold that for 2018 which will reduce my State Tax)
Prepaying Mort Interest would not be helpful.. could try to prepay state tax.. but due to amount.. probably not worth confusion.


AMT not a concern
You could look into something like a Donor Advised Fund. It's like your very own little charitable foundation. It allows you to disentangle the date you get the charitable deduction from the date you actually make the distribution to the charity. Fidelity has a good one. It's really simple to set up and has the added benefit of being able to donate appreciated stock, and then you avoid the cap gains on the appreciated stock. Then you would in fact bunch up charity 30k/0k in terms of when the donation to the DAF was, but you could continue to distribute funds to your desired charity on the desired donation schedule.

SrGrumpy
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Re: Tax Bill Omnibus Thread

Post by SrGrumpy » 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
Last edited by SrGrumpy on Wed Dec 20, 2017 1:49 pm, edited 1 time in total.

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JDCarpenter
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Re: Tax Bill Omnibus Thread

Post by JDCarpenter » Wed Dec 20, 2017 1:44 pm

Seasonal wrote:
Wed Dec 20, 2017 1:41 pm
Does this affect Roth conversion strategy or timing? I'd think the only issues would be that (1) the changes in tax brackets may change the amounts converted in 2018, etc. at the margins and (2) the elimination of Roth re-characterization may limit some cleverness, but am wondering if there are other implications?
For us, the size of the 24% bracket is going to allow us to accelerate conversions. We plan to do big conversion in Jan, then a tailored one in late December to fill that bracket up. The timing of the latter is due to inability to recharacterize any overshots.
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alpenglow
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Re: Tax Bill Omnibus Thread

Post by alpenglow » Wed Dec 20, 2017 1:46 pm

JDCarpenter wrote:
Wed Dec 20, 2017 1:44 pm
Seasonal wrote:
Wed Dec 20, 2017 1:41 pm
Does this affect Roth conversion strategy or timing? I'd think the only issues would be that (1) the changes in tax brackets may change the amounts converted in 2018, etc. at the margins and (2) the elimination of Roth re-characterization may limit some cleverness, but am wondering if there are other implications?
For us, the size of the 24% bracket is going to allow us to accelerate conversions. We plan to do big conversion in Jan, then a tailored one in late December to fill that bracket up. The timing of the latter is due to inability to recharacterize any overshots.
I will be doing the same thing, just in the 12% bracket. Big conversion in Jan with a top up at the end of the year.

Purdue
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Re: Tax Bill Omnibus Thread

Post by Purdue » Wed Dec 20, 2017 1:48 pm

Be careful of the AMT impact if bunching property taxes into 2017 (if you are even able to). AMT has gotten me for a while now because of itemized deductions for property/state/local taxes -- but no more beginning next year!

Tanelorn
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Re: Tax Bill Omnibus Thread

Post by Tanelorn » Wed Dec 20, 2017 1:48 pm

This is a good personal summary of tax changes for individuals.

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

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:49 pm

JDCarpenter wrote:
Wed Dec 20, 2017 1:44 pm
Seasonal wrote:
Wed Dec 20, 2017 1:41 pm
Does this affect Roth conversion strategy or timing? I'd think the only issues would be that (1) the changes in tax brackets may change the amounts converted in 2018, etc. at the margins and (2) the elimination of Roth re-characterization may limit some cleverness, but am wondering if there are other implications?
For us, the size of the 24% bracket is going to allow us to accelerate conversions. We plan to do big conversion in Jan, then a tailored one in late December to fill that bracket up. The timing of the latter is due to inability to recharacterize any overshots.
That's what I'm thinking. It may be wise for a lot of people to take full advantage of the 24% bracket as the next bracket down is only 2% lower, 24% is a pretty good rate, it's a pretty wide bracket, and the next one up is a huge jump (32%).

KlangFool
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Re: Tax Bill Omnibus Thread

Post by KlangFool » Wed Dec 20, 2017 1:50 pm

Folks,

As per my understanding, I should donate to the charity now for whatever amount that I budgeted for next year. This is true if my total itemized deduction for 2018 will not exceed the new standard deduction limit.

Please confirm.

KlangFool

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:51 pm

Tanelorn wrote:
Wed Dec 20, 2017 1:48 pm
This is a good personal summary of tax changes for individuals.

https://www.kitces.com/blog/final-gop-t ... trategies/
Having just read that, I highly recommend it as well. Very exhaustive, and much better than the 10 bullet point Forbes, WSJ or [fill in standard media outlet here] articles.

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llama
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Re: Tax Bill Omnibus Thread

Post by llama » Wed Dec 20, 2017 1:51 pm

My locality explicitly forbids prepaying property taxes. It looks like my best move would be to open a Donor Advised Fund.

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BolderBoy
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Re: Tax Bill Omnibus Thread

Post by BolderBoy » Wed Dec 20, 2017 1:51 pm

So my impression of the comments here is that property taxes are NOT part of "SALT".

Is my understanding correct? It is only state and local INCOME taxes that are capped?
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Drew31
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Re: Tax Bill Omnibus Thread

Post by Drew31 » Wed Dec 20, 2017 1:53 pm

Will be paying Jan and Feb mortgage payments this month. Doesn't look like I'll be itemizing any longer.

IMP EDIT: Later on in thread it was determined that only the Jan payment is deductible due to tax rules.
Last edited by Drew31 on Fri Dec 22, 2017 9:14 am, edited 1 time in total.

rob65
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Re: Tax Bill Omnibus Thread

Post by rob65 » Wed Dec 20, 2017 1:53 pm

Smorgasbord wrote:
Wed Dec 20, 2017 1:38 pm
Well, it looks like 529 plans just got a whole lot more interesting:
TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”.
I for one am going to take a good look at upping my contributions for my preschool aged kids.
I might be wrong, so please verify this elsewhere, but I think one of the 3 changes required by Senate rules eliminated this provision. I think 529 withdrawals will still only be allowed for post-secondary education. Again, I might be wrong.

I was wrong. See the link in mffl's response below.
Last edited by rob65 on Wed Dec 20, 2017 2:09 pm, edited 1 time in total.

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:53 pm

KlangFool wrote:
Wed Dec 20, 2017 1:50 pm
Folks,

As per my understanding, I should donate to the charity now for whatever amount that I budgeted for next year. This is true if my total itemized deduction for 2018 will not exceed the new standard deduction limit.

Please confirm.

KlangFool
Yep, that's my understanding. I'm currently considering contributing perhaps even several years' worth of charitable contributions in 2017 using a Donor Advised Fund, and then distributing the money to the charities whenever I see fit, and taking those capital gains off the table too. The impact of the tax bracket reduction going into 2018, plus taking the standard deduction for a few years, plus the cap gains benefit is pretty hard to ignore.

mffl
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Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 1:54 pm

rob65 wrote:
Wed Dec 20, 2017 1:53 pm
Smorgasbord wrote:
Wed Dec 20, 2017 1:38 pm
Well, it looks like 529 plans just got a whole lot more interesting:
TREATMENT OF ELEMENTARY AND SECONDARY TUITION.—Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.”.
I for one am going to take a good look at upping my contributions for my preschool aged kids.
I might be wrong, so please verify this elsewhere, but I think one of the 3 changes required by Senate rules eliminated this provision. I think 529 withdrawals will still only be allowed for post-secondary education. Again, I might be wrong.
My understanding was the only thing related to 529 plans that got changed in today's revote was the ability to use 529s for home schooling.

http://fortune.com/2017/12/19/byrd-rule-gop-tax-bill/

pshonore
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Re: Tax Bill Omnibus Thread

Post by pshonore » Wed Dec 20, 2017 1:55 pm

Here's the language of the Roth IRA recharacterization clause:
Subpart B—Retirement Plans
SEC. 13611. REPEAL OF SPECIAL RULE PERMITTING RECHARACTERIZATION OF ROTH CONVERSIONS.

(a) In General.—Section 408A(d)(6)(B) is amended by adding at the end the following new clause:


“(iii) CONVERSIONS.—Subparagraph (A) shall not apply in the case of a qualified rollover contribution to which subsection (d)(3) applies (including by reason of subparagraph (C) thereof).”.

(b) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2017.
I interpret that as saying a recharacterizion of a conversion made in 2017 is still allowed; others may interpret it differently.

Nate79
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Re: Tax Bill Omnibus Thread

Post by Nate79 » Wed Dec 20, 2017 1:55 pm

Drew31 wrote:
Wed Dec 20, 2017 1:53 pm
Will be paying Jan and Feb mortgage payments this month. Doesn't look like I'll be itemizing any longer.
I would suggest to check with your mortgage company whether they will report the interest for those payments in 2017 or 2018.

letsgobobby
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Re: Tax Act Omnibus Thread

Post by letsgobobby » Wed Dec 20, 2017 1:57 pm

harikaried wrote:
Wed Dec 20, 2017 1:26 pm
This was shared in the previous thread for some basic playing around with AGI and how the deduction/exemption/credit/rate changes affect the total federal income tax:

http://taxplancalculator.com/

In particular, for those who would have itemized, it might show that in 2018+, you will be taking the standard deduction, so as Alex pointed out, maybe donate to charity sooner in 2017. (But not prepay 2018 property taxes as those will be counted towards 2018 tax year and not be allowed for 2017.)
I question the accuracy of that calculator.

Because it automatically calculates state/local income/sales tax, you don’t know what formula they use. In my case (with sales tax but no income tax) it was off by a factor of four (estimated $13k in state taxes when the real figure is $3500).

Word of warning to others.

homerj15
Posts: 55
Joined: Tue Jan 05, 2016 6:06 pm

Re: Tax Bill Omnibus Thread

Post by homerj15 » Wed Dec 20, 2017 1:57 pm

BolderBoy wrote:
Wed Dec 20, 2017 1:51 pm
So my impression of the comments here is that property taxes are NOT part of "SALT".

Is my understanding correct? It is only state and local INCOME taxes that are capped?
If you look at the law text under Section 11042, it does not mention anything about local property taxes. It does mention SALT taxes so my take is that it's okay. Any other thoughts?
...For purposes of subparagraph (B), an amount paid in a taxable year beginning before January 1, 2018, with respect to a State or local income tax imposed for a taxable year beginning after December 31, 2017, shall be treated as paid on the last day of the taxable year for which such tax is so imposed.”.

BogleMelon
Posts: 1474
Joined: Mon Feb 01, 2016 11:49 am

Re: Tax Bill Omnibus Thread

Post by BogleMelon » Wed Dec 20, 2017 1:58 pm

So where to find what they agreed on without too much details? (Tax brackets, standard deductions..etc)?
I found the brackets, but needed the standard deductions changes..
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

letsgobobby
Posts: 11647
Joined: Fri Sep 18, 2009 1:10 am

Re: Tax Bill Omnibus Thread

Post by letsgobobby » Wed Dec 20, 2017 1:59 pm

BolderBoy wrote:
Wed Dec 20, 2017 1:51 pm
So my impression of the comments here is that property taxes are NOT part of "SALT".

Is my understanding correct? It is only state and local INCOME taxes that are capped?
SALT definitely includes property tax.

Separate from that, the new law prohibits prepaying only state income taxes, but not property tax.

caseynshan
Posts: 224
Joined: Wed Jan 19, 2011 1:11 pm

Re: Tax Bill Omnibus Thread

Post by caseynshan » Wed Dec 20, 2017 2:01 pm

mffl wrote:
Wed Dec 20, 2017 1:43 pm
caseynshan wrote:
Wed Dec 20, 2017 1:36 pm
My personal situation/Strategy

Feel free to add constructive criticism.. might help someone else..

State Tax - 9k
Prop Tax - 3k
subtotal 12k (will be limited to 10k in 2018)
Mort Interest - 6k
charity -15k
---------
Total deductions 2017 - 33k
Total deductions 2018 - 31k

2018 - 31k more than 24k standard deduct.. so no need to bunch Charity. (I don't want to bunch all 30k/0k.. realistically would only bunch charity something like 26k/4k.. which wouldn't end up mattering.)

Can try to reduce SALT a little.. (I have held off on 529 contribution, and will hold that for 2018 which will reduce my State Tax)
Prepaying Mort Interest would not be helpful.. could try to prepay state tax.. but due to amount.. probably not worth confusion.


AMT not a concern
You could look into something like a Donor Advised Fund. It's like your very own little charitable foundation. It allows you to disentangle the date you get the charitable deduction from the date you actually make the distribution to the charity. Fidelity has a good one. It's really simple to set up and has the added benefit of being able to donate appreciated stock, and then you avoid the cap gains on the appreciated stock. Then you would in fact bunch up charity 30k/0k in terms of when the donation to the DAF was, but you could continue to distribute funds to your desired charity on the desired donation schedule.
Excellent Idea.

NorCalDad
Posts: 760
Joined: Sun Mar 25, 2012 11:14 pm
Location: Northern California

Re: Tax Bill Omnibus Thread

Post by NorCalDad » Wed Dec 20, 2017 2:01 pm

KlangFool wrote:
Wed Dec 20, 2017 1:50 pm
Folks,

As per my understanding, I should donate to the charity now for whatever amount that I budgeted for next year. This is true if my total itemized deduction for 2018 will not exceed the new standard deduction limit.

Please confirm.

KlangFool
Yes, I would do this. I also would consider a donor-advised fund if you want to take the charitable deduction now but contribute to your charities in future years.

letsgobobby
Posts: 11647
Joined: Fri Sep 18, 2009 1:10 am

Re: Tax Bill Omnibus Thread

Post by letsgobobby » Wed Dec 20, 2017 2:01 pm

Are the new estate tax exemptions permament, or do they grandfather in some future year? Are they adjusted for inflation?

mffl
Posts: 77
Joined: Wed Dec 06, 2017 7:25 pm

Re: Tax Bill Omnibus Thread

Post by mffl » Wed Dec 20, 2017 2:02 pm

BogleMelon wrote:
Wed Dec 20, 2017 1:58 pm
So where to find what they agreed on without too much details? (Tax brackets, standard deductions..etc)?
I found the brackets, but needed the standard deductions changes..
This seems like a pretty good simple summary that includes tax brackets and thresholds, and also standard deductions and other changes.

http://money.cnn.com/2017/12/15/news/ec ... index.html

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