FYI: Last-minute changes to the Republican tax bill contain an unpleasant surprise for married couples who make between $600,000 and $1 million: They won’t be getting as big a tax cut as lawmakers planned earlier.
The final bill would include those households in the highest individual income-tax bracket, which would pay a marginal rate of 37 percent, according to a summary of the bill’s changes obtained by Bloomberg News, as well as a person familiar with the bill’s contents.
Regards,
Ted
https://www.bloomberg.com/news/articles/2017-12-15/gop-tax-plan-s-top-rate-of-37-said-to-hit-earners-at-600-000
Comments
Highlights: http://www.businessinsider.com/trump-gop-tax-reform-bill-final-text-details-brackets-rates-2017-12
Analysis: https://www.vox.com/policy-and-politics/2017/12/14/16773202/republican-tax-bill-reform-cuts-conference-committee-senate-house
Full text: http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf
(It's only 1097 pages. A really streamlined, simplified tax system
EDIT: I fixed the link to the full text. I'm so disappointed that no one caught the error (i.e. that no one wants to read over 1000 pages of legislation)
House Version: No provision
Senate Version: Any security sold after 1/1/18 is sold FIFO
Conference Agreement: "The conference agreement does not include the Senate amendment provision."
No new FIFO only rule; the Senate version didn't make the cut.
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IRA recharacterization rule (pdf p. 639)
House and Senate versions agree: no recharacterizations for tax years after 2017.
Conference Agreement: fixes the flaw I identified earlier - this version does not prohibit recharacterizing contributions (e.g. contributing to a Roth when you meant to contribute to a traditional); it will only prohibit the unwinding of Roth conversions.
>> Within the middle quintile, people earning $54,700 to $93,200 a year, 62.2 percent would see their taxes go up. (vox article)
So much for that.
p.s., not defending this bill. Just that this lone comment doesn't make sense to me.
will look into it a little and see what I find and report.
The median US home costs $320K, per St. Louis Fed. While western NY home prices are still quite depressed, Hudson Valley homes seem to be in line with US averages. According to Zillow, the median home in Fishkill (there is and IBM plant near there) runs about $300K.
Here's Dutchess county (including Fishkill) home prices overall: https://www.zillow.com/dutchess-county-ny/home-values/
Rochester NY: https://www.zillow.com/rochester-ny/home-values/
NYS property tax rates tend to run high (except for NYC where there's an income tax):
https://www.google.com/search?q=New+York+State+property+tax+rates
Let's use a conservative rate of 2%, and a home value of $320K. That's $6.4K in property taxes.
For the state income tax, let's take an individual with total income (wages, investment income, etc.) of $80K. Subtract a $6K 401k contribution and $8K for the NYS standard deduction, and this person has NYS taxable income of $64K. According to the tax tables, the state income tax for 2017 is $3,791. We're working with round numbers, let's call it $3.8K.
$6.4K + $3.8K > $10K. The new cap is cutting into this person's deductions.
Take an above average home, a higher tax rate that's found in much of the state, or a higher income, and the impact on deductions becomes more sizeable.
BUT... here is a quote from a NY Times article. Basically these deductions that go away are compensated for by a much higher standard deduction. I don't know what the final outcome of all this is, but I'm really feeling it will probably be a wash for me. https://www.nytimes.com/interactive/2017/12/05/us/politics/tax-bill-salt.html
one other point I read, not in NYT I think, but maybe, was that on paper this makes taxation more progressive, which most want, but NOT when it actually goes to marginal cuts for the rich, as this does
Under the existing plan, standard deduction for 2018 MFJ was set at $13000. Personal exemptions were $4150 each. So a married couple would deduct $21300.
If you are age 65+, you would add additional deductions of $1300 each. That brings your total to $23900.
So that's a 12.7% increase for age < 65. And a 0.4% increase for age > 65.
"While many lower-income people take the SALT deduction, many would end up better off under the bill because the new standard deduction would be worth more than what they deducted in SALT and other itemizations."
Apparently the breadcrumbs I left weren't big enough
The NYTimes has an article on that, too, where they note that under the current law "a little under half of American homes are worth enough to justify itemizing mortgage interest and property taxes [but] Under the tax legislation, that figure would fall to close to 14 percent."
https://www.nytimes.com/2017/12/16/business/economy/tax-bill-housing.html
The Times cites a Zillow study: https://www.zillow.com/research/mortgage-interest-deduction-750k-17620/
Which raises the question for people choosing to hold a mortgage because it is "cheap money". Rather than pay off the mortgage, they're using the money to invest. What are they going to do now?
For a household in the 25% bracket (today's rates), the cost of that mortgage may have gotten 1/3 more expensive.
If a couple is paying $4K on a mortgage (say, $100K remaining on a 4% loan), their current after tax cost is $3K (assuming 25% bracket). If they lose the value of the mortgage deduction, their after tax cost is the full $4K, or 1/3 higher than $3K.
Since we're playing games with numbers, how about a different warped calculation:
state median home value x state median property tax rate
Calculated this way, the typical NYS property tax is 4th highest, but at "just" $4600, behind NJ, Conn, and NH, and a bit ahead of Ill, Mass., RI, and VT.
https://wallethub.com/edu/states-with-the-highest-and-lowest-property-taxes/11585/
(The tax bill as a whole was written so quickly, with so many loopholes as to make the idea or calling this a tax simplification bill as a whole laughable.)