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hello all
Went through and did a proforma 2018 tax return and it seems clear, we will be taking the standard deduction for 2018. This is the first time we've taken the standard deduction in a very long time. But we are about 4 years away from paying off our mortgage which means our mortgage interest will likely be about $3,000 for 2018, our property taxes on two home maxed out the $10K for state income + property taxes, our total medical will be below 7.5% of AGI even with paying both our Medicare Advantage 2019 premiums in a lump sum in December 2018, leaving charitables...which I calculated I'd have to make at least a $13,500 charitable contribution just to have our itemized = Standard deduction of $26,600!

Of course, there are other itemizable deductions others may have. So just curious who else may have looked at this for 2018.
I itemized for 2017 and will likely itemize for 2018
I itemized for 2017 and will likely take the Standard Deduction for 2018
I took the Standard Deduction for 2017 and will do the same for 2018
I took the Standard Deduction for 2017 but will likely itemized for 2018
Not sure

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My meds will exceed the 7.5% AGI. No mortgage interest. Property tax and state income tax less than $10K, but I'll come close to 50% of AGI for charitable donations this year, so I'll itemize. Donating a lot of inherited books to a historical society museum so can deduct stepped up basis.
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I picked option 1: I itemized for 2017 and will likely itemize for 2018

but actually, I will try it both ways and pick the cheapest.
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The $13K+ is a large amount to itemize.

For those that are closer to itemizing and do donate to charities a donor-advised fund (DAF) can decouple when contributions are make for a tax deduction and when the donation to the charity is made. Especially, if appreciated assets are used for the contribution to the DAF.

Contributions equivalent to multiple years of donations can be made in one tax year. This may allow itemizing in the years contributions are made and then the standard deduction is used in other years. The actual donations from the DAF can be made over multiple years. Your annual donations to charities can be consistent while the tax deduction is concentrated.

Commonly, it is appreciated stock that is used to fund the DAF. A deduction for the market value can be taken without the capital gain being taxable income.

DAFs cannot accept Qualified Charitable Distribution from an IRA.
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For a couple of years until I qualify for Medicare my health insurance is expensive. There are also medical expenses associated with being inattentive while walking. Health insurance costs plus taxes, dental, vision and donations will cause us to itemize.
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For a couple of years until I qualify for Medicare my health insurance is expensive.

I do qualify for Medicare but, as with Social Security that does not cover all my living costs, so Medicare does not cover all my medical expense costs.

Each is better than nothing, but do not expect your medical expenses to decrease when you are on Medicare. Big copays, big deductibles, large numbers of specialists who do not take Medicare, etc.
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I have filed itemized Federal and state income tax returns for the 46 years prior to the 2018 Tax Year. After reading the Tax Cuts and Jobs Act (TCJA), it was clear that I could no longer file an itemized tax return. I was stuck taking the standard deduction plus the additional standard deduction for those over 65.

I can't take the medical expense deductions as the Medicare Advantage premiums for my wife and I only come to $3,216. Our premiums would need to more than triple to get over the 7.5% threshold as a result of RMD.

Mortgage interest expense deduction? Once you're 75% through the mortgage loan term, the deduction has little value. I paid off the mortgage 15 years ago.

The "SALT" deductions? Due to California's Proposition 13, my property taxes are around $1,700 and too low to be a meaningful deduction. California state income tax is roughly $1,000 more than my property tax.

The miscellaneous expense deductions that were suspended by the TCJA were the deductions that have been most valuable to me over the last 20-25 years. In 2017, I was able to claim a little over $31,000 in miscellaneous expenses. The deductions will be sorely missed in the 2018 tax year.
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Property tax and state income tax less than $10K, but I'll come close to 50% of AGI for charitable donations this year, so I'll itemize.

As a non-cash donation is it limited to 30% of your AGI?
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That's right. But a cash contribution under TCJA is increased to 60 per cent of AGI. Any contributions in excess of this may be carried forward a Max of 5 years to be used on future tax returns.

BruceM
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Each is better than nothing, but do not expect your medical expenses to decrease when you are on Medicare. Big copays, big deductibles, large numbers of specialists who do not take Medicare, etc.

Its not impossible, but it is unusual to have high out of pocket costs under Medicare. Medigap and Part D drug coverage...even the basic plans...will limit out of pocket to a few thousand dollars, while the better coverages, particularly Medigap Plan F, will cover just about all medical out of pocket.

The conditions I can think of that will be high out of pocket while under Medicare are

- Getting medical services not covered by Medicare
- Not enrolling in part B or part D coverage with no other insurance
- Getting expensive dental procedures, such as a bunch of implants

The only groups I've come across that are paying more in premiums and copays under Medicare than what they were formerly paying are Government workers, particularly the Military retirees with Tricare. For just about everybody else, Medicare part B + Medigap + part D, or Medicare part B + MA plan is less expensive that what they were paying.

BruceM
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The last time we itemized was 2014. Medical expenses >7.5% of AGI was our big driver to allow itemization that year and earlier years. Had a positive job change in 2014, so in 2015, income was high enough most medical was not deductible. Tried itemizing in 2015, and just couldn't make it.

Its somewhat ironic to me that itemization benefited me at a lower middle class salary, but not at an upper middle class salary.
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Bunched deductible expenses to the extent I could in 2017, and had a modest medical expense deduction because 13 months of health insurance premiums were greater than 7.5% of my 2017 AGI. Won't come close to having itemized deductions make sense in 2018; bunching expenses in 2019 could make it worth looking at, but at best it will still be close.
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Almost everyone who enters into the itemized vs. standard deduction discussion misses the point that it's far better to take the standard deduction than having to itemize. "Huh?", you say. Congress is allowing you to claim that you spent $12K (single) on various deductible items even if you didn't spend a penny. If you spend more than $12K, then you are cut a break by getting a percentage (far less than 100%) of the excess back as a reduction of taxes. Any way you look at it, you have less money left in your wallet after paying the expenses and itemizing deductions than if you could reduce the expenses below the $12K threshold.

Ira
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Almost everyone who enters into the itemized vs. standard deduction discussion misses the point that it's far better to take the standard deduction than having to itemize. "Huh?", you say. Congress is allowing you to claim that you spent $12K (single) on various deductible items even if you didn't spend a penny.

I think you're the one missing the point.

If I spend $30k on SALT, they will cap it this year at $10k, so I wind up in the standard deduction.
For 2017 I got ~$10k reduction on what I had to pay in federal taxes.
For 2018 I get ~$4k reduction on what what I will pay in federal taxes.
I still spent the same $30k as I did in past years - but now I'm paying MORE to the IRS than I did the previous year.

Now, I haven't sat down and fully done my taxes to see exactly where I'll come out - but it looks very likely that I'll pay more taxes than previous years.

< sarcasm > Yay! Tax cuts for the rich, and screw the middle class! Thank you Ryan and Trump! < /sarcasm >
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If I spend $30k on SALT, they will cap it this year at $10k, so I wind up in the standard deduction.
For 2017 I got ~$10k reduction on what I had to pay in federal taxes.
For 2018 I get ~$4k reduction on what what I will pay in federal taxes.
I still spent the same $30k as I did in past years - but now I'm paying MORE to the IRS than I did the previous year.


What's SALT?
Assuming it's some deductible expense, you're in the same boat as companies with deferred tax assets. They have to write the assets down.
I doubt a majority of population is in this group. So I agree with Ira. Overall, most people will get a tax benefit because of a higher standard deduction.
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knighttof3,

You wrote, What's SALT?
Assuming it's some deductible expense, you're in the same boat as companies with deferred tax assets. They have to write the assets down.
I doubt a majority of population is in this group. So I agree with Ira. Overall, most people will get a tax benefit because of a higher standard deduction.


SALT is an acronym for State And Local Taxes. It includes income, sales and property taxes you might pay.

I'm probably still going to itemize in 2018, so the increased standard deduction does me no good. But you might be right - the majority (as in over 50%) will probably benefit some. Especially if you didn't itemize before 2018 - and a lot of the population doesn't.

But board members are probably not a representative sample of the US population. I suspect that on average they are better off than the population and more likely to have itemized than the average tax payer.

- Joel
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Now, I haven't sat down and fully done my taxes to see exactly where I'll come out - but it looks very likely that I'll pay more taxes than previous years.

The only item that might decrease your taxes is that the SALT limitation may decrease AMT.
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Now, I haven't sat down and fully done my taxes to see exactly where I'll come out - but it looks very likely that I'll pay more taxes than previous years.

The only item that might decrease your taxes is that the SALT limitation may decrease AMT.

============================
Actually, it would just decrease the *marginal* AMT number that gets added to your regular tax, if you were subject to AMT before and after the law change. To think another way, the SALT deduction for AMT purposes was zero before, and still is zero.

There will be some relief from AMT though, due to higher exemption and phaseout amounts.

Bill
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The only item that might decrease your taxes is that the SALT limitation may decrease AMT.

So the lower tax rates and wider tax brackets won't help?

--Peter
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So the lower tax rates and wider tax brackets won't help?

--Peter


As always, your comments are correct. My comment was too restrictive.
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the majority (as in over 50%) will probably benefit some.

Quite a bit more than just "more than 50%." The just-passed change in the tax law was a change in the Federal tax law, and most folks will see reductions in Federal income taxes owed.

What're unchanged are the State and local tax laws, so with the cap, even as folks pay less Federal income taxes, some--mostly those in high-tax State and local jurisdictions--will see an increase in effective State and local taxes owed, and in some (many?) of those limited cases folks will see a net increase in total taxes owed. But that's a result of State and local taxes not going down, which is a matter for the citizens of those high-tax non-Federal jurisdictions to address. The Feds can't touch those.

board members are probably not a representative sample of the US population.

Indeed. We're pretty much outliers as such things go along a number of dimensions.

Eric Hines
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If I spend $30k on SALT, they will cap it this year at $10k, so I wind up in the standard deduction.
For 2017 I got ~$10k reduction on what I had to pay in federal taxes.
For 2018 I get ~$4k reduction on what what I will pay in federal taxes.
I still spent the same $30k as I did in past years - but now I'm paying MORE to the IRS than I did the previous year.

Now, I haven't sat down and fully done my taxes to see exactly where I'll come out - but it looks very likely that I'll pay more taxes than previous years.

< sarcasm > Yay! Tax cuts for the rich, and screw the middle class! Thank you Ryan and Trump! < /sarcasm >


If you have 30K in Property and State Income tax, you are most likely in the top 1% of tax payer AGI. I've written an Excel SS to calculate 2017 Fed income tax and 2018 TCJA tax. Of course it will depend on number and age of dependents, deductions and type of income (ordinary vs QD and LTCG)....but for most with AGIs >$300K will see a tax increase. Yes, this group will have a lower tax rate on some of the expanded tax brackets and they may benefit from elimination of the Pease limit on itemized deductions. But the net tax increase is due primarily to loss of deductions, particularly for those in high income tax rate states with expensive homes (high property tax) and those with dependents age 17 and older. I did not look at those high income households with large deductions who were subject to AMT, however.

The beneficiaries of the TCJA, I've found, will be middle to high middle incomes with kids under 17 in low or no income tax states. Retired households and anyone who took the standard deduction in 2017 will almost by definition see a lower tax bill for 2018. The greatest beneficiary will be moderate to moderate-high AGI Head of Household with dependents under 17 who rents so took the standard deduction and was phased out of some or all of the child credit in 2017.

BruceM
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If you have 30K in Property and State Income tax, you are most likely in the top 1% of tax payer AGI.
I don't think that's true.
Certainly isn't true for me. Wish it were.
I think there are a few people in Iowa or Texas or similar places with $30k in property and state income tax - and they're probably in the top 1% of AGI.
I think there a lot more people in places like Silicon Valley that have $30k in property and state income taxes and are not in the top 1% of income, most probably not in the top 5% even.
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Looks like top 1% of AGI is >$480k of income

https://www.bloomberg.com/news/articles/2018-02-22/to-get-in...

If I were in that group, I wouldn't be complaining about paying an extra <1% of my income in taxes.

But from what I've seen, those with high income are most likely to see the biggest tax breaks, while someone like me gets to pay more.
If it were even that I paid a little more, but the rich paid significantly more, I wouldn't be as bitter. (For example, I'd probably be OK with a 1% increase in my tax rate and a 1.5% increase in those making $250k+)

Not sure if this analysis is on the final version: http://www.taxpolicycenter.org/sites/default/files/publicati...
But it shows a ~1.6% increase in after tax income for those in the top 20% - the biggest beneficiaries of the tax changes.
And at the same time, I'm expecting I will have a decrease in my after tax income if I plug in the same numbers that I had for 2017.
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I think there are a few people in Iowa or Texas or similar places with $30k in property and state income tax

No, there's no one in Texas with "$30k in property and state income tax." Maybe a few with $30k in property tax, but that would be on a house with a value in the neighborhood of $1.7 million. That owner is atypical.

Eric Hines
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No, there's no one in Texas with "$30k in property and state income tax." Maybe a few with $30k in property tax, but that would be on a house with a value in the neighborhood of $1.7 million.

I think you just made my point - there are likely a few people - not many.

That owner is atypical.
Again - that's my point - there's only a few.

And if you're coming to this discussion with the background of someone living in one of those areas, you would think $30k of SALT is huge - that it must be someone in the top 1%.

But a lot of people with $30k of SALT are in Silicon Valley and other similar places. And vast majority of them aren't earning >$480k/year.

So the majority of people with $30k of SALT are *not* in the top 1% of AGI.
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But you might be right - the majority (as in over 50%) will probably benefit some.

45% already don't pay any federal income tax.
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a lot of people with $30k of SALT are in Silicon Valley and other similar places.

And that's my point. SALT is a matter for those citizens to address with their State and local governments. The Feds can't enter that discussion; they can only determine Federal tax requirements.

Eric Hines
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I think you're the one missing the point.

If I spend $30k on SALT, they will cap it this year at $10k, so I wind up in the standard deduction. ...


I wasn't referring to the dislocation caused by TCJA. I'm suffering with the loss of full SALT deductions too. I was referring to the situation in a stable tax code environment. When comparing 2016 to 2017 (or presumably 2018 to 2019), it is better to the bottom line to be in the standard deduction range than the itemized deduction range. In other words, taxpayers who complain that they don't get the "benefits" of itemized deductions don't realize that they have more money after taxes (and expenses) than those that itemize.

Ira
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Everyone is different but for me the new standard deduction is about $1500 more than itemizing deductions but the loss of the personal exemption means my taxable income will be $2500 higher than under the old tax laws. Changes in tax rates may offset some of that but I'm still getting little or no break from the new tax law. And from the proposals for a new 1040 design I've seen I'll have more forms to complete even if I don' have to fill out the itemized deduction form.

I think a lot of people have realized they aren't getting much out of the tax cuts. You need to be in a top income bracket to really benefit. That's why a lot of congressional candidates didn't run on the tax cuts. They must have been surprised to find voters aren't as dumb as they thought they were.
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I wasn't referring to the dislocation caused by TCJA.
Well, the thread is about 2017 taxes vs. 2018 taxes - so the thread is about the TCJA IMO.

If you want to bring up a more general thing about how standard deduction is "better", that's fine - but that's basically a tangent to the discussion.
You said people are "missing the point" - but they really aren't.
And the post you responded to - where the person was talking about bunching expenses into different tax years - that post IMO shows that they really understand the std. deduction and how to maximize itemizing vs. std deduction over multiple years. And that post was also about TCJA changes - although because of bunching the deductions it was about 2018 and 2019 vs. 2017, not just 2018 vs. 2017.
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