I didn’t see they’re dropping personal exemptions.
If so that does change it.
Figuring again I get ~$992 increase at $175k income and $1742 increase at $190k.
$150k would be a drop of $257 though.
How are you running the numbers? Roughly it appears any income that’s $112k to $190k will be subjected to an extra 5% marginal tax rate, going from 28% to 33%. And income from 91k to 112k gets a 3% tax cut.
So the income savings from 91k to 112k are $600 ($21k has 3% less taxes)
The income increases at 190k are an extra 5% on $78k or $4k. Roughly a net $2,500 tax increase at $190k given the deduction/exemption changes.
Any income from 190k to 413k is unchanged at the same 33% tax rate But they still have the same higher taxes on that 112k to 190k income, so anyone making 190k to 413k is paying an extra $2500 in taxes by my rough math, making it regressive because the $413k wage earner pays the same $2500 tax increase that the $190k earner gets.
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I think you misunderstood what scripta was saying. You’re not being taxed on TAXES you pay. No one is taxed on taxes. You’re taxed on income. You, in particular, just don’t have a deduction that someone that isn’t subject to the AMT has.
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Calculating the total tax at each level and adding it up.
Note with the Trump plan as shown the income in the $0 to $37,500 level also gets a break. Right now you pay 10% on the first $9275 and 15% on the $9275-37500 level. thats $5160 in tax now. However with that all going to 12% in the proposed Trump plan you get $4500 thats a $600+ cut in the lower level too.
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That makes sense. Misunderstood the first time.
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[quote=“TripleB, post:102, topic:1661”]
How are you running the numbers?[/quote]Once again, the new income thresholds have not been set, so running your calculations based on the current income thresholds is totally pointless.
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Watched the debate between Bernie Sanders and Ted Cruz on CNN last night. Well, I watched the first hour. Kinda tuned it out after that. The one takeaway I got that is useful to this thread was from a question asked to Ted Cruz about the state and local tax (SALT) deduction. It was framed the same way several people in this thread framed it - Trump and Republicans want to punish blue staters with higher state taxes. The answer Ted Cruz gave can be slightly encouraging to you SALT folks. He said that he is in favor of removing that deduction, but only if the overall taxes paid by people currently taking the SALT still goes down because of the lower tax rate. If you run a quick and dirty estimate for a husband and wife making $220,000, deducting 24,000 in mortgage interest, 17,000 in property tax, and 12,000 in state income tax, you get a current tax of ~31,500. With the rates in Triple B’s post and no 12,000 state income tax deduction, their tax would be closer to 33,000. Obviously, the closer you get to ~450,000 in income, the worse that difference would be. So for those upper middle income to lower upper income folks, in order for Ted Cruz to be telling them the truth, the rates in TripleB’s post would have to change.
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I support elimination of SALT deductions. It encourages blue states to go crazy on taxation and pay their garbage men $100k/year with lifetime pensions after 20 years. Red states tend to be more fiscally conservative, have lower property and state taxes, and are essentially punished by existence of SALT deductions.
If SALT deductions went away, the blue states would have to cut taxes or risk greater exodus than they currently have. This would lead blue states to being more fiscally responsible.
In other words, SALT deductions are a form of cost shifting from fiscally responsible states to irresponsible states since the residents of responsible states have to burden a larger portion of the federal tax liability.
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the new tax plan is terrible for homeowners. with elimination of most deductions and doubling of std deduction, no one will be able to claim mortgage interest deduction unless their current mortgage loan balance is more than ~$300k (this number is higher if you are at the middle or end of your loan period).
this means most property values can drop as home ownership is no longer incentivized until you reach the upper middle/upper class (for most parts of the US). sucks because i just bought a house this year and it is looking quite likely to lose value now. if you are on the market to buy a house, i would not buy one now. continue to rent for the next year or two and it is likely you will be rewarded with a discounted home.
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This is a good point on par with the purpose of the thread which is discussing strategies to look for if the tax changes are approved.
Mortgage interest deductions won’t be eliminated but the increased standard deduction means fewer people will itemize, reducing the incentive for paying more for a home. Sorry to repeat your points dealmaster00 but I think this is worth emphasizing. I think people over value the mortgage interest deduction than its actual benefit but if it is not as big a factor for many homeowners it will create downward pressure on the housing prices. May be worth holding off on buying a house to see what happens.
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At the medium to high end and in high income tax markets it will hurt, but in most of America where the median home price is less than a quarter million, it will not have much difference. At today’s rates, a $200,000 mortgage will pay about $6,500 a year in interest, and the delta between the MID, property taxes, and SALT for an average married couple might be a few hundred bucks at most. There are other reasons to own property other than the tax deduction. The biggest would be not paying taxes on the imputed rent, and of the tax free gain when selling a home. Imputed Rent: a Big Hidden Tax Break for Homeowners
It may only be a few hundred dollars in difference at current rates on a $200k home but as interest rates rise that doubles the downward pressure on house prices. One could argue though that because the standard deduction increases, mid-low income households are better off because they get a better tax break so it’s a wash, but the incentive for buying a more expensive home to benefit from the tax savings is either gone or reduced which would affect the housing market price and in some cases - affordability.
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I don’t understand imputed rent argument at all? Couldn’t you do the same with any asset? You can rent anything. TVs, computers, furniture, etc. Why single out housing?
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There’s no tax break for financing your car or TV (instead of renting it), but there currently is for houses via the mortgage tax deduction. If that goes away, it will make renting more favorable vs owning, at least superficially. In practice, it will depend on how the rent and own market prices move in light of this, which could be either way. Still, if you had to guess, removing the mortgage deduction would probably lower housing prices since cashflow based buyers are less able to afford a given purchase price without the tax break.
That said, I’m pretty sure the “affordable housing” advocates aren’t going to come out to the woodwork to support this, so who knows if it passes. They should though - this is just the government propping up housing prices artificially (which they have been doing with the Fed’s low rates also).
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Talk of Rothifying 401Ks has reared it’s ugly head again:
Expanded article at WSJ:
“Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.”
“Under some of the proposals being floated, contributions above the amount set for tax-deferred savings would have to go into a Roth account. The change wouldn’t affect existing balances in traditional 401(k)s and IRAs, those people said, and it is likely that any matching contribution from an employer would continue to go into a tax-deferred 401(k) account.”
Paywall workarounds for your convenience:
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The financial interests are more powerful than the realtors and like taking their fees out of accounts on a percentage basis. Contributions to 401k would drop dramatically. If the GOP wanted to bring about a “universal savings account” and replace tax deductible savings with an account with tax free gains that had an equivalent to the sum of IRA + 401k, that would be more revolutionary, but this is tinkering at the margins stuff that pisses people off. https://www.accountingweb.com/practice/clients/tax-free-universal-savings-accounts-proposed-in-congress
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This will be the first year you won’t be able to get away with simply ignoring the question on your tax return asking whether or not you had health insurance.
So it seems like one way to use this information is to switch to doing as much traditional 401k as possible until things change. This would still allow some tax diversity gained currently by splitting contributions between Roth and traditional.
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That’s what we’ve been doing.
I’d read that Rothifying now would give the federal government more money in the short-term, the next 10 years, but it would hurt them long-term. And then what are they going to do, when there is no more pre-tax money left to tax? Oh wait… 
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Yeah, the thing with Roth money is that right now there’s so little of it, since it’s hard to contribute a lot and hasn’t existed for long enough to really grow compared to pretax money, that it’s relatively safe from the thieving politicians. The big pot of pretax money is an easier target, and all they have to do is raise taxes since it’s already hostage. But if too much money ends up Roth, you can bet they’ll start proposing “means testing” and reneging on the tax free promise just like they did on Social Security.
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