MD Taxes and SALT

[Anonymous]

Anonymous wrote:We are paying a few thousand more due to the loss of SALT. Our AGI is 150k.

+1

[Anonymous]

Anonymous wrote:

Anonymous wrote:I do my taxes with freetaxusa and made a second account to put my 2017 information in as if it was 2018 (and thus under the new tax law).

Comparing the returns, the new tax law reduced our federal tax burden by ~$1,750. But, this is entirely due to us now qualifying for the $2,000 child tax credit. If we didn't have a child our tax burden would have been ~$250 higher.

What is your ballpark AGI?

This seems like the result most people will get to around 150K.

AGI was 185k in 2017.

[Anonymous]

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:Keep in mind that in 2017 the standard deduction for MFJ was $12K vs 2018 at $24K. So you aren't really losing "$10k" in SALT

Why do people keep forgetting that we also lost the personal exemptions?

True but most people come out ahead with the $2K child credit (a credit and not a deduction which is more powerful at lower incomes).

But my 18 year old dependent does not qualify for the credit...

because the party of family values believes that once you turn 18, that's it, you should be on your own. Something about bootstraps.

I think you lose it at 17...to be precise...I guess you are suppose to be on your own before graduating from high school.

Seriously! I don't get a tax credit for my 17-year old junior in high school. So the $2000 tax credit did not make up for the lost in exemptions. Plus we lost $2K in itemized deductions due to SALT. Our effective tax rate went up.

If you only lost $2k in deduction it is hard to imagine your tax rate really went up from last year. At that level the reduction in rates and elimination of marriage penalty more than makes up for it. The only other explanation might be that your income went up from last year. I would double check your taxes if you haven't filed.

Here are my numbers (rounded):

2017 [/u]
income: $128.8K
itemized deductions: $27.4K
exemptions: $20.2K
taxable income: $81.2K
tax before credit: $11.6K
child credit: $2K
tax owed: $9.6K
effective tax rate: 7.4%

2018 [u]
income: $133.1K
standard deduction: $24K (would have been $26K itemized if there was no SALT limit)
exemptions: $0K
taxable income: $109.1K
tax before credit: $15.6K
child credit: $4.5K
tax owed: $11.1K
effective Tax Rate: 8.3%

[Anonymous]

I should add that my itemized deductions would have been at least $26K without SALT, but I stopped adding up my charities because the SALT limit brought it down to $21K and I knew I didn't have $3K more in charity deductions.

[Anonymous]

Anonymous wrote:I did our taxes last weekend. We lost something like 20K in deductions, though we still itemized (just barely). We did owe the Feds (about 1500), but we paid the same percentage of our income in federal taxes from last year to this year. This year, we're updating our withholdings so hopefully we won't owe next year. So we weren't actually screwed tax wise. That said, where we're actually going to be screwed is with the downstream uses of our AGI, which is now significantly higher than it had been before. Our income-based student loan repayments will be based on the much higher AGI the next time we re-certify, so I expect our student loan payments to increase significantly. We're also sooooo much closer to the hitting the income limits for contributing to a Roth IRA. We are both getting relatively small raises this year, but they may be enough for us to hit the cap next year, so we'll have to figure out alternatives. I don't know that there's anything MD can do to help with these downstream consequences....

Backdoor Roth. We’ve been over the income limit for years and get the max into our Roths every year.

[Anonymous]

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

AKA defund good public schools in Blue states. This what that tax bill was all about.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

Because we don’t want to live in Kansas?
I thought conservatives did not like double taxation

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Has anyone found that other changes have balanced out the SALT hit? For instance, we now qualify for the $2,000 child credit and our rate has gone down from 28% to 24%. But I'm feeling really dumb about weighing all the factors.

I'm also regretting not changing our withholding this summer like so many of you smart people advised. Gah!

We came out ahead despite the SALT change.

It depends on your individual circumstances. Our SALT was previously limited by AMT. However, a combination of lower rate, AMT repeal and surprise child credit made our tax rate lower than last year.

Also the marriage penalty for married filing jointly has been eliminated for all brackets except the top one. This helped us a lot.

Can someone tell me more info on this?

[Anonymous]

I found a link: https://www.fool.com/taxes/2018/11/15/the-irs-marriage-penalty-is-alive-and-well-but-onl.aspx

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

Because we don’t want to live in Kansas?
I thought conservatives did not like double taxation

They don't mind it for the blue states. Signed--180K and paying 3K more this year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

AKA defund good public schools in Blue states. This what that tax bill was all about.

It's not only blue states. I don't live in a blue state - North Carolina - which is at best purple. Yet, my state income taxes are 5.5% (flat rate for everyone) and there are personal property taxes on cars plus my property taxes. I pay over $15K in SALT. Of course, the SALT limitations affect states like NJ and CA more, but it extends beyond just blue states.

[Anonymous]

Anonymous wrote:

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Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Keep in mind that in 2017 the standard deduction for MFJ was $12K vs 2018 at $24K. So you aren't really losing "$10k" in SALT

Why do people keep forgetting that we also lost the personal exemptions?

True but most people come out ahead with the $2K child credit (a credit and not a deduction which is more powerful at lower incomes).

But my 18 year old dependent does not qualify for the credit...

because the party of family values believes that once you turn 18, that's it, you should be on your own. Something about bootstraps.

I think you lose it at 17...to be precise...I guess you are suppose to be on your own before graduating from high school.

Seriously! I don't get a tax credit for my 17-year old junior in high school. So the $2000 tax credit did not make up for the lost in exemptions. Plus we lost $2K in itemized deductions due to SALT. Our effective tax rate went up.

If you only lost $2k in deduction it is hard to imagine your tax rate really went up from last year. At that level the reduction in rates and elimination of marriage penalty more than makes up for it. The only other explanation might be that your income went up from last year. I would double check your taxes if you haven't filed.

Here are my numbers (rounded):

2017 [/u]
income: $128.8K
itemized deductions: $27.4K
exemptions: $20.2K
taxable income: $81.2K
tax before credit: $11.6K
child credit: $2K
tax owed: $9.6K
effective tax rate: 7.4%

2018 [u]
income: $133.1K
standard deduction: $24K (would have been $26K itemized if there was no SALT limit)
exemptions: $0K
taxable income: $109.1K
tax before credit: $15.6K
child credit: $4.5K
tax owed: $11.1K
effective Tax Rate: 8.3%

That is bad.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Nothing you can do except press on your elected officials to introduce new federal tax legislation.

How about pressing your state and local legislators to introduce less burdensome state and local tax rates?

AKA defund good public schools in Blue states. This what that tax bill was all about.

Such a tired trope. Let's all agree that high quality public schools are a priority. Since money is fungible, the money is taken away from the non-priority items, like political vanity projects, and handouts. Don't for a second argue that the money will be taken away from schools. It's just not true.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Has anyone found that other changes have balanced out the SALT hit? For instance, we now qualify for the $2,000 child credit and our rate has gone down from 28% to 24%. But I'm feeling really dumb about weighing all the factors.

I'm also regretting not changing our withholding this summer like so many of you smart people advised. Gah!

We came out ahead despite the SALT change.

It depends on your individual circumstances. Our SALT was previously limited by AMT. However, a combination of lower rate, AMT repeal and surprise child credit made our tax rate lower than last year.

This is right. If you make (generally) north of $250,000, you likely had AMT, and the elimination of that, plus the lower rates, probably works to your advantage, even with the SALT limitation (which had previously been limited for you anyway). If you are between $100k and $250k, you're likely screwed.