@cpaynter said in How will the new tax bill affect your taxes?:

@principalmember said in How will the new tax bill affect your taxes?:

No, married filing jointly. Our itemized deductions total up to about $44k, SALT is only $14k of that. Even with the $10k SALT limitation, we’ll still be at around $40k in deductions, so much higher than the $24k standard deduction for MFJ.

Chris.

Sorry not understanding. So if SALT caps you at 10K and you have a 120K house, how do yo get 44K in deduction?

Charitable contributions.

So you contribute about 30K in charitable contribution and you are complaining about tax increase? Think of it as another charitable contribution - just distributed to every US tax payer. You have my thanks!

No, married filing jointly. Our itemized deductions total up to about $44k, SALT is only $14k of that. Even with the $10k SALT limitation, we’ll still be at around $40k in deductions, so much higher than the $24k standard deduction for MFJ.

Chris.

Sorry not understanding. So if SALT caps you at 10K and you have a 120K house, how do yo get 44K in deduction?

@almighty1 said in Steps to take in 2017 for the upcoming tax changes:

Still a bit confused since I really am trying to find out what indebtedness means as it’s obvious one cannot deduct principle. So are they saying that there will no longer be form 1098’s?

You would be able to still deduct mortgage interest. But not for 2nd home, not for home equity loans. Also, going forward, for new mortgages, if your loan is more than 750K, then only the interest on the 750K would be deductible.

Rough numbers: for married, assuming that you max out property+locai income taxes at 10K, since standard deduction is 24K, first 14K of mortgage interest would give you no benefit. Assuming a 4% mortgage interest rate, if your mortgage is less than 350K, itemization won’t give you any benefit. Only if your mortgage is between 350K-750K, will you get some benefit from mortgage interest indebtedness or whatever fancy word is being used.

@amusingsquid said in How will the new tax bill affect your taxes?:

Since I don’t itemize, I’m getting a tax break. But it’s really not good for so many middle class people are getting a tax increase. Some of those itemized deductions were given to corporations under this tax bill, but not extended to the middle class. And middle class deductions like local and state taxes were taken out!

Not good.

If you voted for this guy, you deserve what you get. If you didn’t, you have my sympathies. While everybody says he is helping the rich, one thing that I cannot figure out is why he didn’t remove the 3.8% surtax on investment income and didn’t flat out the capital gains at 15%. And then he has shafted his real rich buddies with big mansions and lots of state taxes.

@cpaynter said in How will the new tax bill affect your taxes?:

@principalmember said in How will the new tax bill affect your taxes?:

Those people who had their AMT deduction mostly wiped out may benefit nicely from this bill. Basically, they had their deductions wiped out - i.e. no property tax/state income tax deduction and then they were paying 26%+28% with no AMT exemption. However, with the new bill, they get 24K in deduction and gradual tax rate versus the 26%. Just for grins example calculation - 2017 income: $500,000. Under the old AMT system, AMT exemption wiped out and $136K in taxes. Using the calculator above, it is 118K - almost 18K lower. [This excludes mortgage interest - so if you had a large mortgage, the savings would be lower.

There has been a lot of crying about the property tax/state income taxes being limited to 10K (effectively can’t even do it since you need a big mortgage to overcome the 24K std deduction). But personally, for the high earners, not being able to deduct state income tax may be wash since the new rates are lower at the higher end.

Fortunately for me, I never bought into, “Buy a big house for the mortgage / property tax deduction” - so things might be in really solid shape.

I never bought into the “buy a big house for the deduction” crap either. I just bought a reasonably-sized house for ~120k in a place near where I worked, which unfortunately happened to be Illinois.

Yes, it’s the income/property tax limitation that’s killing me. State income tax around 4600, property tax around 9200. What’s maddening is that last month, when the plan was to eliminate the state income tax deduction entirely, but leave property tax deductible, I was actually saving money on that plan, even though I was losing a full 4600 of deductibility. With the $10k rule, I’m actually getting $800 more deduction than last month’s plan, but the brackets have been sufficiently shifted so I get shafted.

I am presuming that you are single - else you will pretty much be taking the 24K standard deduction.

I am aware of the straddle rule with respect to vertical option spreads. Basically, you can’t book the losses for tax purposes if you close out the loss position. What about the gains? The rule says nothing about the gains.

What I am trying to do is book the gains this year and book the losses next year. [IRS /congress probably were always probably too happy to have somebody book the gains but the new tax laws create an interesting situation where booking the gains this year and paying state taxes on it this year robs IRS of some taxes next year]. I worked it out - I save about 4.5% by booking LT gains this year versus next year.

Those people who had their AMT deduction mostly wiped out may benefit nicely from this bill. Basically, they had their deductions wiped out - i.e. no property tax/state income tax deduction and then they were paying 26%+28% with no AMT exemption. However, with the new bill, they get 24K in deduction and gradual tax rate versus the 26%. Just for grins example calculation - 2017 income: $500,000. Under the old AMT system, AMT exemption wiped out and $136K in taxes. Using the calculator above, it is 118K - almost 18K lower. [This excludes mortgage interest - so if you had a large mortgage, the savings would be lower.

There has been a lot of crying about the property tax/state income taxes being limited to 10K (effectively can’t even do it since you need a big mortgage to overcome the 24K std deduction). But personally, for the high earners, not being able to deduct state income tax may be wash since the new rates are lower at the higher end.

Fortunately for me, I never bought into, “Buy a big house for the mortgage / property tax deduction” - so things might be in really solid shape.

Thank you gwraigty. I missed the part, "The conference agreement follows the House
bill and generally retains present-law maximum rates on net capital
gains and qualified dividends. " on page 14.

(The reason I was muddled is because they tied the rates to 39.6 in the senate version and then the 39.6 rate disappeared).

What is a surprise is that Trump & company are not doing any favors for their rich buddies on the capital gains.

If the tax rates are the same, then being able to deduct the taxes on LT gains from state taxes this year definitely seems interesting to me. That would be step #4 to take this year. I will definitely be doing that for the call options that expire in Jan - i.e. I am going to be forced to take the capital gains - I just get to choose this year versus next year.

I was also looking at what happens to Capital Gains. I live in CA and I think I am still muddled on this one.

2017: High income, LT capital = 20%. But state tax deductible. Keeping numbers simple: State incremental 10%, deduct from federal at 30%. Net state payment = 7%. So total LT capital = 27%.

2018: Seems like they are dropping LT capital to be 15% for a much larger income bracket. So it would be 15% + 10% - so looks like I would be better off deferring LT capital to next year - save 2% and have extra year of float.

Anyways, still have time before the end of the year - hopefully Trump does sign it near 25th and then I have a few days to “not trade”.

@frugalpete said in Steps to take in 2017 for the upcoming tax changes:

if your tax rate will be lower in 2018, then defer income if you can.

Good point. And if you are subject to AMT, don’t forget that for most practical purposes, AMT tax rate is 32.5% and not 28%.