Thread: Details of Proposed Tax Plan

In a nutshell,

Tax.jpg

Update: I ran the math wrong earlier-I would owe approximately 2K more next year in fed tax, not 1500 less. Maybe I'll bump up my charitable contributions even further next year, at least I'll know where the money is going. and pay a little less in fed tax. makes it harder to save for business startup in a couple years, even if I can do full deduct for expenses in a given year. Got to fork out the funds for the expenses first before can deduct them.

I want to avoid using OPM for startup funds. Would like to not worry about loan repayments until I know I'm turning a profit, not pay interest on top of not having a net profit right away. For me, it's all about having initial savings for startup capital, and then managing cash flow. I never took any business classes, never had any interest until I started looking into what I might do in retirement to be productive, stay interested by developing current hobby interests into small biz and desired retirement lifestyle. now I'm learning biz development by bootstrap, similar to how I've learned other things over the years, as needed.

There are other interesting items in the tax bill, at least of interest to me. won't point out all the ones of interest to me but there are some of general interest perhaps.

Think really hard about divorce, if you would be the one paying alimony. You will be paying the taxes on the alimony payment. The ex would not be paying them.
Think hard about bouncing around to new job every couple years or otherwise exchanging primary residences. No more cap gains exemption unless stay in same primary residence 5 of past 8 years.
Make suuure you get a written receipt signed and dated, for every charitable donation valued at $250 or more.

https://www.scribd.com/document/3633...ion#from_embed

Originally Posted by alevin

Think really hard about divorce, if you would be the one paying alimony. You will be paying the taxes on the alimony payment. The ex would not be paying them.
https://www.scribd.com/document/3633...ion#from_embed

From the bill:
Under the provision, alimony payments would not be deductible by the payor or includible in the income of the payee.
So does this mean that the receiver of alimony doesn't have to include the alimony payment as income either?

The provision would be effective for any divorce decree or separation agreement executed after 2017.
Yipeeee! I catch a break on that one (lol)

Originally Posted by alevin

Think hard about bouncing around to new job every couple years or otherwise exchanging primary residences. No more cap gains exemption unless stay in same primary residence 5 of past 8 years.

https://www.scribd.com/document/3633...ion#from_embed

Wow, thats going to hurt a lot of companies looking for employees outside their local area. Could be a big impact on the economy, especially already having a worker shortage in most sectors.
Not to mention Fed agencies and those looking to move up the career ladder by moving. Wonder if the Federal Gov't and its employees get an exemption thru RITA???

FWM it means the payor includes the alimony in their taxable income. not deductible for them. The receiver does not have to pay taxes on the alimony payments. And yes, you sir are safe (think dancing with the starz "safe" ), since your situation reached resolution prior to 2018.

and yes, it does mean that someone may have to pay more in terms of salary or benefits if they really want a current or prospective employee to relocate to new location further than 50 miles from that persons current location. Especially since one of the other provisions removes the deduction for moving expenses for relocation further than 50 miles for new job. That one could impact me, as I expect to relocate post-retirement before starting any small biz, or becoming employee for anyone else (I do have an offer waiting for me when the time is ripe).

fortunately the 5 of 8 year rule for home sale will have no impact on me, but if I work for someone else post-retirement (possibility exists-with housing provided as part of the package, but I'd give it no more than a couple years before focusing 100 percent on my other plans)-would likely require an additional move elsewhere yet again in 2 years time.

Originally Posted by alevin

FWM it means the payor includes the alimony in their taxable income. not deductible for them. The receiver does not have to pay taxes on the alimony payments. And yes, you sir are safe (think dancing with the starz "safe" ), since your situation reached resolution prior to 2018.

and yes, it does mean that someone may have to pay more in terms of salary or benefits if they really want a current or prospective employee to relocate to new location further than 50 miles from that persons current location. Especially since one of the other provisions removes the deduction for moving expenses for relocation further than 50 miles for new job. That one could impact me, as I expect to relocate post-retirement before starting any small biz, or becoming employee for anyone else (I do have an offer waiting for me when the time is ripe).

fortunately the 5 of 8 year rule for home sale will have no impact on me, but if I work for someone else post-retirement (possibility exists-with housing provided as part of the package, but I'd give it no more than a couple years before focusing 100 percent on my other plans)-would likely require an additional move elsewhere yet again in 2 years time.

I didn't realize the trimming of Capital Gains for homeowners needing to live 5 years in a home instead of just 2.
My first 2 starter homes owned were for 3 years and 4 years respectively, and allowed me to quickly build wealth to get a top notch home.

This one hurts the average person trying to move up the socio-economic ladder...creating an even bigger buffer with the super elite who no longer have to deal with the "Estate Tax".
Also hurts the housing industry bigtime.

Between companies having an even tougher time finding workers, peoples progression from starter home to dream home and wealth slowed by many years...to the hit on the entire housing industry...it all seems to spell one thing: R-E-C-E-S-S-I-O-N

I'm a bit confused on this.

My understanding is that personal exemptions - where we were able to deduct $4,050/person - would be eliminated under the new tax plan.

Is that correct?

Originally Posted by ripper

I'm a bit confused on this.

My understanding is that personal exemptions - where we were able to deduct $4,050/person - would be eliminated under the new tax plan.

Is that correct?

That is what I have read. They replace it with a credit for children (1,600) and one for non-children (300). Not clear on phase outs.


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Originally Posted by alevin

Update: I ran the math wrong earlier-I would owe approximately 2K more next year in fed tax, not 1500 less. Maybe I'll bump up my charitable contributions even further next year, at least I'll know where the money is going. and pay a little less in fed tax. makes it harder to save for business startup in a couple years, even if I can do full deduct for expenses in a given year. Got to fork out the funds for the expenses first before can deduct them.

Sorry, Charitable Gifts are no longer deductible!!

Folks,

There may be simplification in the tax code, but there can really be no tax cut. We ensured that over the past eight years - maybe longer. Our debt grew from $9T to $20T over the last eight years. The interest rate is going up now. Time to pay the piper.

By the way, the corporate tax is a sham. While a tax rate of 36% is a joke no corporation pays that. They have write-offs. The tax attorneys get the difference. A simple and fair 20% will probably result in less aggressive tax management and a higher level of compliance. That in itself may result in more tax income. At least businesses will know what their tax burden is.

Regardless, the numbers on our debt repayment no longer work. We have to pay... All those goodies are not free and the Chinese and the oldsters with bonds want their mullah... And, they should get it. A promise made is a promise kept. All we can really hope for is simplification - and, this bill may move us toward that.

Originally Posted by uscfanhawaii

Sorry, Charitable Gifts are no longer deductible!!

Charitable gifts are deductible if you itemize.

The only real difference is that fewer people will itemize because the standard deduction will be higher than the itemized deductions. That will be my situation. It is actually already my situation. I still donate to charities even though I get no deduction from it.

Originally Posted by Jackbnimble

That is what I have read. They replace it with a credit for children (1,600) and one for non-children (300). Not clear on phase outs.


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Thanks. It's a bit misleading when they tout doubling the standard deduction without mentioning eliminating personal exemptions. Also sounds like there will no longer be an extra exemption for those 65 and older. Simpler doesn't necessarily mean fairer.

Trump tax plan: 'Doubled standard deduction' is misleading - Business Insider