Showing posts with label Federal Income Tax. Show all posts
Showing posts with label Federal Income Tax. Show all posts

12.21.2017

Highlights of the new tax reform law

Changes for Individuals:
  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
  • Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately) — through 2025 
  • Elimination of personal exemptions — through 2025
  • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025
  • Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018
  • Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
  • New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers) — through 2025
  • Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions — through 2025
  • Elimination of the deduction for interest on home equity debt — through 2025
  • Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters) — through 2025
  • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025
  • Elimination of the AGI-based reduction of certain itemized deductions — through 2025
  • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025
  • Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year
  • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025
  • Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025
The source of the above is a non-copyrighted email from Peterson Whitaker & Bjork, LLC  

How the tax cuts and jobs act could affect these 5 households

Excerpt: A married couple with $100,000 in AGI, no children, $7,000 in annual mortgage interest, $4,000 in charitable contributions, and $3,000 in other itemized deductions.

Now, let's look at a slightly more complex tax situation. Under current tax law, this couple would have $14,000 in itemizable deductions, which is better than the $13,000 standard deduction to which they would be entitled. They would also get personal exemptions of $4,150 each. This would reduce their taxable income to $77,700. Based on the current tax brackets, the couple would pay $10,676 for the year. With the new tax plan, the higher standard deduction of $24,000 would make it no longer worth itemizing, and would give this couple a taxable income of $76,000. The new tax brackets would result in taxable income of $8,739, a $1,919 savings.
What's Your New Bracket Under the GOP Tax Bill? Find Out Here

Excerpt [note: click through for all brackets / shown below: For married couples filing jointly]:

[The] tax bill, while it keeps the existing seven tax brackets, changes the rates and income levels people will have to pay, maintaining the baseline 10% as the lowest level, but cutting the high end from 39.6% to 37%.


Comment: We are not exactly like the married couple with no children. We are retired empty-nesters. What I am doing to prepare for the 2018 tax year:


  • Paying off the HELOC. The interest will no longer be deductible (see bullet point 9 above)
  • Prepaying next year's property tax. See Forbes article
  • Opening a DAF
Re below: some would say "levels the playing field" with renters










Comment below: Another take on how impacts various tax situations. None of the below match mine:







Posted by Jim Peet at 12/21/2017 02:19:00 PM 2 comments

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1.31.2014

Earliest Tax Day - 2014



Filing Your Taxes Early? IRS Will Not Process Returns Before Opening Day

Excerpt:

Tax season for individual taxpayers opens on January 31, 2014
Comment: The earliest I've ever filed taxes

Posted by Jim Peet at 1/31/2014 09:09:00 PM 2 comments

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10.15.2010

2011 INCOME TAX CALCULATOR

The Tax Foundation

Not So Golden Years: Rise in Capital Gains and Dividends Tax Would Hit Seniors Hard

Excerpt:

The baby boomers' nest egg will soon start to crack if the Bush tax cuts are allowed to expire.

Retired seniors could be among the hardest hit by the failure to extend Bush-era tax cuts on Jan. 1 since they rely most on investments and savings

Lawmakers have been warning for months about the income-tax consequences for working families, including penalties on marriage and a reduction in child tax credits.

But those living off investment income would see not only their 401(k) and savings accounts taxed at higher income rates, but also dividends and capital gains skimmed deeper and deeper by the federal government.

Studies of IRS data put out by The Tax Foundation show seniors over 65 earn more from dividends and capital gains than any other age group -- more than $77 billion in dividends and more than $150 billion in capital gains in 2008.

That means for retired workers, every penny is that much more valuable. Investment income typically supplements Social Security, or vice versa, and tax analysts say that if the Bush tax cuts expire, it could mean thousands of dollars less every golden year.

Comment: The second link has a quick calculator.

Posted by Jim Peet at 10/15/2010 01:58:00 PM 1 comments

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7.10.2010

Prohibition and the law of unintended consequences

Another round of Prohibition, anyone?

Excerpt:

Americans abolished a widely exercised private right -- and condemned the nation's fifth-largest industry -- in order to make the nation more heavenly. Then all hell broke loose. Now that ambitious government is again hell-bent on improving Americans -- from how they use salt to what light bulbs they use -- Okrent's book is a timely tutorial on the law of unintended consequences.

The ship that carried John Winthrop to Massachusetts in 1630 also carried, Okrent reports, 10,000 gallons of wine and three times more beer than water. John Adams's morning eye-opener was a tankard of hard cider; James Madison drank a pint of whiskey daily; by 1830, adult per capita consumption was the equivalent of 90 bottles of 80-proof liquor annually.

Although whiskey often was a safer drink than water, Americans, particularly men, drank too much. Women's Prohibition sentiments fueled the movement for women's rights -- rights to hold property independent of drunken husbands; to divorce those husbands; to vote for politicians who would close saloons. So the United States Brewers' Association officially opposed women's suffrage.

Women campaigning for sobriety did not intend to give rise to the income tax, plea bargaining, a nationwide crime syndicate, Las Vegas, NASCAR (country boys outrunning government agents), a redefined role for the federal government and a privacy right -- the "right to be let alone" -- that eventually was extended to abortion rights. But they did.


Comment: Consider earlier post

Posted by Jim Peet at 7/10/2010 09:41:00 AM 1 comments

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6.13.2010

The interesting link between Prohibition and the Federal Income Tax

No Closing Time for Income Taxe

Excerpt:

The nation’s dependence on the alcohol tax created a vexing problem for the leaders of the Prohibition movement. As early as 1883, the editors of the Woman’s Christian Temperance Union’s official newspaper coyly asked their readers, “How, then, will [we] support the government” if the sale of liquor is prohibited?

The editors had a ready answer: an income tax, they wrote, was “the most just and equable arrangement ever made for the equalization of governmental burdens.” In 1895, the Prohibition Party recognized that an excise tax “is a pledge on the part of the state to defend and foster the thing taxed,” and it soon nailed an income tax plank to its platform. And leaders of the most powerful Dry organization, the Anti-Saloon League, grumpily aware of what one called the “alleged ‘loss of revenue’ argument,” chose to focus most of its attention on state-by-state, rather than federal, prohibitory laws.

But the league also encouraged the populist campaign to authorize an income tax. When this support finally bore fruit in 1913, the organization announced that “the adoption of the Income Tax Amendment to the federal Constitution furnishes an answer to the revenue problem.” As a result, it said, the time had come for all foes of alcohol to put aside the state-by-state strategy and focus on a new goal. “National prohibition,” its executive committee declared, “can be secured through the adoption of a constitutional amendment.” By 1920, it was law.


Comment: Interesting

Posted by Jim Peet at 6/13/2010 03:14:00 PM 0 comments

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