[quote=“Full_Disclosure, post:221, topic:1661”]Haven’t read the whole thing yet, but people on the fence of itemized vs standard currently are likely not to see a reduction (again, based solely on the first couple sections).[/quote]I don’t think that’s at all accurate. If you are on the fence between a standard deduction and itemizing, a standard deduction that’s almost double the size of the existing one will benefit you more.
What does appear to be the case is that low income families with lots of children may be disadvantaged by the tax plan, as they are eliminating dependent exemptions. So, if you have 5+ kids, the increase in the standard deduction will be smaller than the dependent exemptions would’ve been for each child.
[quote]Anyone find any changes to the capital gains rates? Section 1(h) currently - but at least section 1301 of the Bill explicitly does not modify that section. The capital gains rates are tied to the brackets so if they’re changing the bracket thresholds its surprising they aren’t updating the capital gains “brackets.”[/quote]Good point.
What I am also not clear on is whether the ACA taxes are staying in place. It appears that they are, which means that the Medicare surtax, as well as the investment income surtaxes are remaining in place, which makes the tax brackets effectively higher.
Maybe I’m missing something, but this is my calculation.
Current system - single filer: current standard deduction + personal exemption = 10,400.
Under the Bill = 12,000
So if you’re itemized deductions are 1,600 more than the standard deduction, you come out even, but if they’re more than that your taxable income is higher than under the current system.
[quote=“Full_Disclosure, post:223, topic:1661”]
Maybe I’m missing something, but this is my calculation.
Current system - single filer: current standard deduction + personal exemption = 10,400.
Under the Bill = 12,000
So if you’re itemized deductions are 1,600 more than the standard deduction, you come out even, but if they’re more than that your taxable income is higher than under the current system.
[/quote]Well, $1,600+ over the standard deduction isn’t quite being on the fence, but I see and agree with your point. Remember, however, that for most people the tax rate would also go down.
Likewise, if you were previously in the AMT territory, the calculations would also be different, as under the AMT you also lost most exemptions and deductions.
“After that come the tougher challenges of reaching a House majority and melding this bill with a separate Senate plan scheduled for release as soon as next week.”
It’ll be interesting to see the differences between the 2 plans. Would it be fair to say that the proposals that are similar in both plans will most likely come to pass in some form?
As in, both plans might call for no changes to 401k contribution rules, so that has a better chance of being in the final bill. Both plans might agree on the number of tax brackets, but the taxable income levels might be slightly different. A final compromise might include the same number of tax brackets, but taxable income levels slightly different than what is in the House proposal.
However, if the Senate proposal calls for a reduction in the amount of 401k pretax contributions, then anything could happen with that.
“The plan, named the Tax Cuts and Jobs Act, calls for leaving the top individual tax rate at 39.6%, but pushing the income threshold for that rate to $1 million for married couples. The House Ways and Means Committee plans to consider the bill next week with the aim of turning it into law by Christmas and having most of it take effect in 2018 and be reflected on tax returns filed in early 2019.”
Has there been an analysis on what this tax plan will do to the deficit? I’ve seen the opinions of thinktanks from a few days ago, but nothing yet today.
One interesting thing I saw is that you now must live in a house 5 out of the last 8 years in order to exclude the gain from your income. Right now it is 2 out of the last 5 years. And you only get the exclusion once every 5 years.
Yes, I saw a blurb about the cap gains exclusion on primary residence…but having trouble finding details.
Glad I moved when I did…had a $75k gain in less than 3 years on last home, got lucky with a hot neighborhood at the right time. Now into our long-term home.
Reducing tax breaks for housing may have the unintended consequence of making houses more affordable. Fewer people would need to take the itemize deduction, which would put pressure on house prices.
In addition, fewer transactions would also put pressure on that 6% commission. This could accelerate the move towards discount realtors like Redfin.
Just like healthcare or higher education, if the federal government subsidizes your product, the price increase is inevitable and seemingly unstoppable. Housing is no different. Federal support has caused prices to rise beyond the reach of many. This will help the younger generation.
Excuse my skepticism, but aren’t a lot of these “proposed” tax changes only designed to fill the re-election coffers of congressmen? Any cut to retirement tax credits should get the guys with a lot of money, and a lot to lose (to dig into their wallets promptly).
Ya, we know it’s going to be changed and even the modified version may not get passed. The thinking on the street is that the $500k mortgage limit will probably stay in the final version. We shall see.
