I just calculated my federal income tax for 2017 under current law and under the new GOP bill assuming 2017 brackets but revised rates. We get a tax raise of about $2800. Our state taxes will also go up if we take standard deduction on Federal taxes, as we are forced to take standard deduction on state taxes as well.We are a retired couple, solidly middle income in the 25% marginal tax bracket (under current law). We have no earned income and no eligible children or dependents. Almost two thirds of our income is from qualified dividends. The rest is from interest and taxable portion of retirement plan distribution. We live in a high income tax "blue" state. Our itemized deductions for state income and property tax and charitable deductions are significantly higher than 2017 standard deductions. Under the new law due to $10,000 cap on state tax deductions, we are better off taking the standard deduction. What hurts even more is the loss of deduction of personal exemptions of over $8100, without any offsetting tax credits. As a result our taxable income shoots up by almost $12000.Since a significant portion of our income is from qualified dividends, taxed at lower rates than wage and interest income, we do not feel the full bite of the increased taxable income. Under current law around 55% of our qualified dividends are taxed at 0%, and the rest at 15%. Under the new law, around 42% of our qualified dividends are taxed at 0%. Also the income taxed using tax tables is significantly higher and even at lower rates under the new plan, the tax is higher.And we will have to find quirky and unproductive ways to minimize our overall Fed+state taxes. Double charitable deductions one year and skip them the next. Itemize on Fed, even if less than standard to be able to itemize on state. Lobby representatives to adjust state tax laws to compensate new Fed tax law. We probably do not represent the typical working family with children living in red states that the GOP sought to benefit. But we probably are representative of many retired middle-income couples, with no dependents or mortgage and no wage income.Even though our taxes go up, I can't complain, because of the very preferential treatment of investment income over wage income. Our net tax rate (not marginal rate) even under the new law is under 10%; it is under 8% under current law. When you consider FICA taxes, a couple with similar total income as us, but typically comprised of mostly wages, would have a significantly higher net fed income+FICA tax rate (the proverbial Buffett and his secretary paradigm).I had no hope that the GOP tax reform would be the promised "abolish IRS and mail in a post card" return. And I am still hoping we will have a fairer, simpler and progressive tax system where all sources of income (wage, investment, carried interest etc) are treated the same, FICA wage limits are removed and rates reduced, no itemized deductions/credits allowed except significant catastrophic losses/expenses above a threshold. And I hope it does not take another three decades to achieve it.So though our taxes go up under the new law I am not complaining about that, as our overall rates are still very low. It is just the huge wasted opportunity to truly improve the tax system.
Oh...wow......"Even though our taxes go up, I can't complain, because of the very preferential treatment of investment income over wage income. Our net tax rate (not marginal rate) even under the new law is under 10%; it is under 8% under current law. "You previously paid 8%? That's barely enough to keep the lights on in Congress...well,not even......Gimme a break.....you were living 'cheap' for sure. Now it goes up to UNDER 10%. So you pay about an extra $1000 in taxes in your high tax state. Not even 10% of your income. I'd bet 50 million out there would love to swap tax rates with you. Last year I think I paid about 17% of my income in fed taxes and about half my income is in qualified dividends. I might save a few bucks this year with the higher standard deduction.....in my lower tax state (no income tax). Might be time for those high tax blue states to get their houses in order.. Why should everyone else subsidize them? Let folks write off tens of thousands in state taxes and super high real estate taxes....so we got to pay more to keep the government working? really...paying 'less than 10%' of your income to Uncle Sam. Oh horrors! Sounds like you are paying more than that to the state and your real estate tax entity. t
Might be time for those high tax blue states to get their houses in order.. Why should everyone else subsidize them? Let folks write off tens of thousands in state taxes and super high real estate taxes....so we got to pay more to keep the government working? California is a high tax state and a donor state for federal income. We are subsidizing conservative states.
Might be time for those high tax blue states to get their houses in order.. Why should everyone else subsidize them? Top ten states that get more than a $1 from the Feds for each $1 in tax -SC ($7.87!!!), then ND FL LA AL HI MS NM KY WV INStates that pay more than a $1 from the Feds for each $1 in tax -DE MN IL NE OH KS NY CO UT NJ OK WY MA CARed state parasites preaching self dependence are truly low information voters.
...really...paying 'less than 10%' of your income to Uncle Sam. Oh horrors!Tele, you quoted the OP but perhaps you didn't read what you copied and pasted: "Even though our taxes go up, I can't complain, ...What's your beef with what he said?IP
I didn't mean to start a political discussion on this useful and usually tranquil board, which I occasionally visit for tips. There are plenty of other boards in TMF devoted to for political warfare. I apologize for any annoyance caused.One last comment. I referred briefly to future adjustments in state laws to offset limits on SALT deductions. Apparently the process is already under way, and the GOP tax bill hasn't even been signed.https://www.bloombergquint.com/global-economics/2017/12/18/f...
Sadly, when I was working as a CPA preparing tax returns, I had many clients with six figure incomes that paid less than 10% in income tax. Some paid none at all. I have done this myself, and recently, too, without particularly trying. Most folks focus on their marginal rate, and the tax software always wants to include that number in their letter. I always customized the form to include their total tax divided by income from all sources. Most were shocked to see how little they actually paid. I too do not mind that my taxes will go up under this plan, but the giveaways to the very rich are annoying. And the amount that the poor working class pays in employment taxes is particularly shameful. But fear not, change may be the only constant in our society.
States that pay more than a $1 from the Feds for each $1 in tax - Clearly, that should read "States that get less than a $1 from the Feds for each $1 in tax -"And, apologies for the political post (no matter how popular.)
telegraph,You wrote, Last year I think I paid about 17% of my income in fed taxes ...FWIW, it looks like I paid more than 25% in 2016. But of course most of my taxable income was wages and included FICA. In 2017 my composite Federal tax rate should go down ... because I'm going to have a lot more in qualified dividends and capital gains to report compared to the prior year.- Joel
Well the high taxes may prove benefits as blue states tend to be wealthier than Red stats.http://stopcontinentaldrift.blogspot.com/2017/12/labor-force...Actually deduction of state taxes was originally a Republican innovation about avoiding double taxation.brucedoe
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