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video - 30 million Americans (21%) are expected to owe more to IRS this tax season

http://www.msnbc.com/stephanie-ruhle/watch/millions-of-ameri...
Millions of Americans won’t get a tax refund and might have to pay
Americans were promised more money in their paychecks last year after the president’s new tax law went into effect, but now millions more people won’t get a refund this year – some might even have to pay up. Stephanie Ruhle and DCReport.com Founder David Cay Johnston break down why a lot of people are upset about this.
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More than likely, it will come down to those people living in high income tax states. They will loose the previous deduction of writing off state income taxes. No one should be surprised.

JLC
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More than likely, it will come down to those people living in high income tax states. They will loose the previous deduction of writing off state income taxes. No one should be surprised.

It's not just people with those large state deductions that are impacted. A family of 5 would have had a $12.7k standard deduction plus $4050*5 = $20250 in personal exemptions in 2017. That's ~$33k in off the top in 2017, but limited to $24k in 2018. Depending on income level, the reductions in tax brackets may or may not make up the difference.
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Millions of Americans won’t get a tax refund and might have to pay

I'm not a fan of the TJCA changes (they're far too generous to those with high incomes), but in all fairness, people are putting too much emphasis on whether or not they'll get a refund, and not what their actual tax liability was. A refund is simply the difference between what you paid and your actual tax obligation, and the change to the standard deduction had a huge impact on withholding calculations for dual income households. Someone's tax obligation could actually go down in 2018, but because their withholding was also reduced, they could end up owing more. All across the financial forums, people are complaining about owing, and most aren't even looking at how their actual tax liability changed year to year.
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Exactly. And tax preparers told them this a year ago and they didn't pay attention or take steps to mitigate the difference.
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It's not just the high state/local tax people that are affected. As usually happens with tax cut bills, the adjustments to the withholding tables are greater than than the actual tax cut. Congress, and the IRS through its execution of the new law, wants the average taxpayer to see the effect of the tax cut immediately. The consequences come down the road when it doesn't matter to their (the politicians') reelection.

FWIW, I contacted all my clients in August to suggest reviewing and adjusting their withholding to meet their desired year-end result. Only 10% took me up on my offer.

Ira
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but in all fairness, people are putting too much emphasis on whether or not they'll get a refund, and not what their actual tax liability was.

Financial literacy is sadly lacking in the US. Too many do not really understand compounding, let alone the tax bill. I still regularly run into people who think the marginal rate is what they pay on everything, and if they slip into a higher bracket they will pay that higher rate on all their taxable income. This is hardly helped by tax programs that helpfully calculate an "effective tax rate" by dividing the tax paid (after credits) by the taxable income (income after deductions, exemptions, and exclusions).

When I would calculate tax actually paid, divided by total income from all sources, most of my 6 figure income clients were paying a low to mid single digit percent in taxes. Most of them were shocked, but still thought they were paying too much.

The number that understand how regressive and oppressive the employment taxes are is even lower. The powers that be focus tightly on the income tax, and many do not understand the difference.

So glad I retired from tax prep. Wish I saw more hope for the future.
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When I would calculate tax actually paid, divided by total income from all sources, most of my 6 figure income clients were paying a low to mid single digit percent in taxes.

Did they have 10 kids and multi-million dollar homes for interest deduction?
It's hard to believe that anyone making 6 figures could pay < 10% in Federal income taxes (not even counting Social Security, Medicare, etc.)
Of course thanks to TJCA the point is moot now.

The SALT limit is going to create a big backlash IMO. General public: wall - yawn, "fine people on both sides" - meh, hurt my pocketbook - I am coming after you.

As far as financial literacy etc - taxes are too complicated and boring. Nobody who is not a tax preparer wants to think about them too much, even if they are important. Same as the other constant in life - death.
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I'm getting my taxes done on the 15th of February....Still waiting on Schwab for 1099B.......
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When I would calculate tax actually paid, divided by total income from all sources, most of my 6 figure income clients were paying a low to mid single digit percent in taxes. Most of them were shocked, but still thought they were paying too much.

Ok....how? Are you including unrealized investment gains as "income"? Our gross income (mostly w2) suggests we'd be in the 32% marginal bracket (we aren't after deductions). All said, we'll end up paying around 15% effective. I can't imagine how someone in my shoes would get down to "low to mid single digits".
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When I would calculate tax actually paid, divided by total income from all sources, most of my 6 figure income clients were paying a low to mid single digit percent in taxes. Most of them were shocked, but still thought they were paying too much.
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Ok....how? Are you including unrealized investment gains as "income"? Our gross income (mostly w2) suggests we'd be in the 32% marginal bracket (we aren't after deductions). All said, we'll end up paying around 15% effective. I can't imagine how someone in my shoes would get down to "low to mid single digits".

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Well, you can't go too high into the six figures, but under prior law it certainly could be true for taxpayers with around $100K of AGI. (And higher, depending on itemized deductions available.)

With $100K of AGI, and with personal exemptions and a normal amount of itemized deductions for taxpayers with that income, especially retirees, with a lot of qualified dividends and/or capital gains , their taxable income would be below $70k, and thus their dividends and capital gains would be taxed at zero. (Which is actually below the low single digits.)

And that includes yours truly. Alas, we no longer get personal exemptions. But having reached age 65, we have a standard deduction of $26,600. Between that, and the fact that our dividends aren't taxed, we really don't have a lot to complain about.

Bill
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There are many ways to get there. Some had no dependents, but lots of tax free investments. The largest family had five kids. No multi million dollar homes, but some had rentals with depreciation losses. I never counted unrealized gains, but I did count qualified dividends, social security, interest on tax free bonds, etc. I won't give specific examples from my clients, but in 2016, our AGI was $124,844 and our tax was zero. We have one child we still claim. We had put solar panels on our house that year and couldn't even use the whole credit - had to carry some over to 2017. But even without any credits, our tax would have only been $7,218, which was just 5.78% of our AGI. This happens a lot more often than you might think. In 2017, our AGI was $112,640, and our tax was $3,645 - just 3.2%. We bought a Tesla Model 3 in 2018, so I expect to again pay zero tax. For 2019 we are building a new home, with more solar panels. I do expect to pay more under the new code, but not much more. People who work for a living are getting robbed, legally. We get ripped off in other ways. I pay over $1,100 every month for health insurance for my son and I. DH is on Medicare, thankfully.

When people like Warren Buffett tell you we are in a class war, and the wrong class is winning, believe him.
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People who work for a living are getting robbed, legally.

Well, somebody's gotta pay the bills, lol...

On gross income of nearly $340k, we're looking at about $54k in federal tax. That'll go down just a little when I finish entering the last few deductions. Oh, and we paid another $20k in SS and Medicare taxes (just our share, not employer). And I expect a little extra medicare tax on our investment income. Let's ballpark it at $75k total for the year. Wow...

But at the end of the day, I really can't complain. Where else could I find the amazing opportunities we've been lucky enough to enjoy? We made way more money than we really need, saved a ton, and paid a bunch of taxes too.

Interestingly, when I run our rough numbers through a tax calculator, I find that we would have paid $11.5k MORE in federal tax under 2017 rules. As I mentioned upthread, the newly expanded 24% bracket is ridiculously favorable to those in our income range. While my pocketbook loves it, I do wonder about the long term impact...
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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.

BruceM
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