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Subject:  Re: Millions won’t get a tax refund & migh Date:  2/16/2019  5:22 PM
Author:  BruceCM Number:  128694 of 129771

The right way to compare 2017 to 2018 tax bill change, is to run the 2018 numbers through an Excel SS set up with 2017 rules and inflation adjusted deductions. IOW, treated as through the TCJA had not passed. I've done this and run several household incomes through it. These are the major determinants of how much your tax bill would go up or down in 2018 based on my experience.

1. Number of dependents under 17. This is a major factor for those dual income household that were in the phase out for the child credit in 2017. For example, our daughter's family have 3 kids under 17 and their AGI put them near the top of the phase out for this credit last year...but under the TCJA they get the full $6,000 credit.

2. Number of dependents not under 17. Same family as above, except all are 17 and older. 5 total dependents for 2018 means a lost deduction of 5 X 4,150 = 20,750, but did pick up a non-refundable $500 credit per dependent (1,500 credit) not under 17....but not enough to overcome the negative effect of the lost personal exemption deduction.

3. State of residence. High income tax, high property tax states, where an AGI of $100K - $200K in 2016, from the IRS SOI tables, shows an average property tax deduction for this group of $5,153 and an average State income tax of $7,259 = $12,412, and that's an average for 2016. Imagine what those values will be for residents of NY, CA or OR. Deduction over $10K are lost under TCJA.

4. Retired household that itemized deductions in 2017, had large savings under professional management but have moderate AGI. This group losses the management expenses in excess of 2% of AGI which I've found can run in a lost $3,000 - $10,000 misc itemized deduction

The group I did not test were those high income households subject to the AMT, and I'd guess their's was generally a favorable tax savings, but I don't have a feel for how much.

High income households...$500K - $1MM AGIs, depending on state of residence and number of homes owned, I found were within 1-2% of what their tax would have been without the TCJA. The dollar amounts seem large but that's because they have high income. Their main benefit was the 0-4% reduction per tax bracket and the higher ceiling for most brackets, but also the loss of the PEASE reduction in itemized deductions.

My experience is the major beneficiaries are going to be those filing HOH with kids under 17 living in a no-income tax state filing the standard deduction in 2017 and in the 25% bracket and phased out the 2017 child credit. The major losers are those with high incomes, multiple dependends >17 with multiple homes in high SALT states with mortgages that total >$1MM

Interestingly, the effective tax rate (Tax after credits/gross income subject to taxation) on our 6 figured income in retirement has changed very little under TCJA (5.7% now vs 6.4% in 2017), due to a large part of our income coming from QD + LTCG, no income tax state and with very little mortgage interest left, in 2017 we were barely over the $12,700 SD.

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