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CHECK MY MATH


TAXMAN

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3 hours ago, TAXMAN said:

Looking at tax only:

2017 MFJ 70K AGI 5 EXEMPTIONS STANDARD DEDUCTION TAX =4625 (AGI WAGES ONLY)

2018 MFJ 70K AGI 5 EXEMPTIONS STANDARD DEDUCTION TAX=5139 (AGI WAGES ONLY)

Just trying to get a grip on this

Yes, looking at tax only, this is correct.  Tax is $514 more.

But if I understand correctly, if the three dependents are under 17, the credits will be $3,000 more.  ($6,000 instead of $3,000).   If the three dependents are over 17, the credits will be $1,500 more.  ($1,500 instead of zero.)  Don't think the Family Tax Credit is refundable, but I think your client is better off in 2018 either way. 

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3 hours ago, jklcpa said:

It's going to be interesting to see how well the W-4 choices applied to the new withholding tables relates to reality and the tax planning that we do.  

Shoot, my clients are all over the place whether the law changes or not.  It's terrifying.

"Hey, Rita, how do I fill out this W-2 thingy again?  I'm up to about eight and a half here on this worksheet blah, blah, blah..." 

Me:  Drive over here and I'll have a thingy ready for you.  Don't trouble yourself [for the love of God don't].

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I've been getting a number of calls and yes, it is all over the map.  Many clients in hi RE tax state NY (especially Long Island), many with decent income, nurses married to firefighters and teachers married to cops, and the like.   Between loss of deductions and exemptions the higher standard deduction sometimes works by a little or doesn't work by a lot.  Especially when they were used to getting much higher itemized deductions.   And if they have a second home, forgettaboutit!

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I have one client who claimed $89k in NY state and NYC taxes last year.  Bought a house on Long Island this year which will add $36k in property taxes.  Sum of both limited to $10k in 2018.  Won't be pretty.  But his tax rate will go from 39.6 to 37%.  Whooo Hooo.

The others who will take a big hit are salespeople who get only partial reimbursement from their employers.  I have one who gets a Sch A deduction of $20k just for unreimbursed mileage.  With Misc itemized deductions gone, this will hurt.

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The original post is questioning the math for calculating the tax liability before any credits are applied. Given the assumptions of the child tax credit for 2018, I will agree with Rita the client maybe better off in 2018. It is probably needless to say but each situation will be different and it will be so hard to give any advice until we see the entire picture. On another note, if you're like me, married with an empty nest, and right at the so called middle class limits, not being able to itemize and with the loss of the personal exemptions will no doubt have a negative effect for 2018.

BTW- the math of the OP is correct

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11 hours ago, jklcpa said:

It's going to be interesting to see how well the W-4 choices applied to the new withholding tables relates to reality and the tax planning that we do.  

Yes, going to get very interesting.   With so many millions paying more due to all the re-jiggering the lower withholding may not reflect reality.  A colleague of mine in Westchester, NY, another high ST and RE tax area said she sees a tax revolt (or at least a tea party) once all these people get their tax bill in 2019.  She thought that year would be a good time to retire.  As Thunderclap Newman sang...Call out the instigators.....Because there's something in the air.   I sense this too, depending on how expensive taxes get for those millions of taxpayers, get ready to do some 'splaining Lucy.   We'll be the first sounding board to hear the complaints.

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9 hours ago, Terry D said:

On another note, if you're like me, married with an empty nest, and right at the so called middle class limits, not being able to itemize and with the loss of the personal exemptions will no doubt have a negative effect for 2018.

I think you’re going to be pleasantly surprised, Terry. Unless you mean you’ll no longer be able to itemize in 2018  I read it to mean you don’t itemize now   I’m still on the first cup of coffee.

And if your business is a pass thru, don’t forget about the 20% deduction there  

I think the great majority of my clients will pay less tax with the new law. They are “all over the place” when completing W-4s, however, so the bottom line on tax returns may be weird, but that can be explained by comparing with corresponding other lines from the 2017 return. 

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1 hour ago, Abby Normal said:

Yes, and I read on Forbes that Sch Es get it too, but I haven't been able to corroborate.

My little voice tells me they didn't mean for passive income to get that deduction.  But my little voice has been wrong a few times.

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8 hours ago, RitaB said:

I think you’re going to be pleasantly surprised, Terry. Unless you mean you’ll no longer be able to itemize in 2018  I read it to mean you don’t itemize now   I’m still on the first cup of coffee.

And if your business is a pass thru, don’t forget about the 20% deduction there  

I think the great majority of my clients will pay less tax with the new law. They are “all over the place” when completing W-4s, however, so the bottom line on tax returns may be weird, but that can be explained by comparing with corresponding other lines from the 2017 return. 

Rita, I do itemize now and will probably not be able to in 2018. Sorry if I wasn't clear. Yes, I get the 20% which maybe my only saving grace. I will, however, reap the benefits by 2021. I plan on retiring from my teaching job by then and will live on SS, pension and business. Oh yeah, I'll get the higher standard deduction then too. Have been thinking about moving to the beach for our golden years and keeping a place here that has living quarters attached to an office for tax season. All sounds nice but time will tell.

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Side question --- Will spouse qualify as one of the // can't deduct as dependent??  where we will get a $500 credit since usually spouses are over 17?   Wondering.

My main worry on the new brackets and standard deductions are not as much for family's but for those usually older folks who lose their partner -- goes from 24K standard down to 12K so depending on dollars remaining, could be a BIG hit for tax (of course less costly to keep living for one -- but not always that much less at times.     Devil in details and all will be specific to the client.

Welcome to 2018 ////// as stated by Judy on our Facebook site ------ 365 opportunities to use (for good or bad  - you decide).

 

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6 hours ago, Abby Normal said:

Yes, and I read on Forbes that Sch Es get it too, but I haven't been able to corroborate.

Just a random thought - can a business owner who rents his office/warehouse to his business create an LLC to hold the rental property and get the 20% passthrough deduction?   I assume treasury will impose self dealing rules, but what if they don't get to them before the 2018 filing season?

Just trying to be creative.

Tom
Modesto, CA

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18 hours ago, Terry D said:

Rita, I do itemize now and will probably not be able to in 2018. Sorry if I wasn't clear. Yes, I get the 20% which maybe my only saving grace. I will, however, reap the benefits by 2021. I plan on retiring from my teaching job by then and will live on SS, pension and business. Oh yeah, I'll get the higher standard deduction then too. Have been thinking about moving to the beach for our golden years and keeping a place here that has living quarters attached to an office for tax season. All sounds nice but time will tell.

Thanks for clarifying, Terry.  I also itemize now, even as HOH, but I'll lose my last dependent in 2018 (she's graduating with a Doctorate in Physical Therapy thank God on many fronts), so the 20% deduction will be a lifesaver when I move to Single brackets.  So glad it's a deduction for income tax purposes only.  I don't mind paying SE tax (well I do who am I kidding), but I look at that one as a pension investment.  LOL.

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On 1/3/2018 at 1:30 PM, BulldogTom said:

Just a random thought - can a business owner who rents his office/warehouse to his business create an LLC to hold the rental property and get the 20% passthrough deduction?   I assume treasury will impose self dealing rules, but what if they don't get to them before the 2018 filing season?

Just trying to be creative.

Tom
Modesto, CA

If you are thinking a SMLLC, that won't qualify for a pass through, as it reports its own income.  Maybe an S-corp would work.  Besides you'd save the $800 fee on the 1st year.

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