Am I the only one whose taxes increased in 2017?

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RetiredCSProf
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Am I the only one whose taxes increased in 2017?

Post by RetiredCSProf »

Am I the only taxpayer whose federal taxes actually increased in 2017? My marginal tax rate (filing HoH) decreased from 25% to 24%, but the SALT restriction more than made up for that.

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Edit: I meant that the tax reform of 2017 increased taxes on my income in 2018 and following years.
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I know that it is against forum policy to discuss pending tax changes. To the contrary, I frequently see posters warn that the tax reform of 2017 will sunset in 2026, and thus, assume that everyone's taxes will go up then, in particular, as a rationale to encourage Roth conversions now rather than later. I think it makes sense to convert now rather than later to transfer future growth from tIRA to Roth, regardless of possible unforeseen tax changes in the future.

Does it ever make sense to base financial decisions on what tax changes may occur in the next 1-10 years? For example, the RMD tables are expected to change in 2022, such that I must deplete my tIRA by age 120 instead of by age 115. I have no idea how to plan for that change.
Last edited by RetiredCSProf on Thu Jun 24, 2021 8:11 am, edited 1 time in total.
livesoft
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Re: Am I the only one whose taxes increased in 2017?

Post by livesoft »

Our federal taxes increased [for 2018 and later] because we used to bunch deductions for Schedule A into every other year. A way to think about this is that under current law we get about 2 x $24K of [standard] deductions or $48K for 2 years, but with bunching we would get over $55K over two years.
Last edited by livesoft on Thu Jun 24, 2021 1:33 am, edited 1 time in total.
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gobel
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Re: Am I the only one whose taxes increased in 2017?

Post by gobel »

Are you saying your taxes went up from 2016 to 2017? Did your income increase as well? The tax brackets did not change until the 2018 tax year. For most people taxes went down (given exactly the same income), but I do remember reading some examples here of people who were in a tiny sliver of income and deductions where the changes hurt them. Also, if you had really high SALT, were you paying AMT before and now you're not? You would compare the pre-2018 tax+AMT to the post-2018 tax+(0)AMT to see if you gained or lost.
namajones
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Re: Am I the only one whose taxes increased in 2017?

Post by namajones »

RetiredCSProf wrote: Wed Jun 23, 2021 10:29 pm Am I the only taxpayer whose federal taxes actually increased in 2017?
Nope. Mine went up. So did those of my two closest friends.
DoubleComma
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Re: Am I the only one whose taxes increased in 2017?

Post by DoubleComma »

Mine went up considerably, combination of SALT cap and considerable non-reimbursed business expense deductions were lost. The adjustment to AMT helped, but the total amount paid in federal income tax spiked on very similar income.
Hyperchicken
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Re: Am I the only one whose taxes increased in 2017?

Post by Hyperchicken »

The [TCJA] bill was signed into law by President Donald Trump on December 22, 2017. Most of the changes introduced by the bill went into effect on January 1, 2018, and did not affect 2017 taxes.
https://en.wikipedia.org/wiki/Tax_Cuts_ ... ct_of_2017
HootingSloth
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Re: Am I the only one whose taxes increased in 2017?

Post by HootingSloth »

The Tax Policy Center estimated that 4.8% of households saw a tax increase in 2018 as a result of the TCJA.
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JoinToday
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Re: Am I the only one whose taxes increased in 2017?

Post by JoinToday »

RetiredCSProf wrote: Wed Jun 23, 2021 10:29 pm .......
Does it ever make sense to base financial decisions on what tax changes may occur in the next 1-10 years? For example, the RMD tables are expected to change in 2022, such that I must deplete my tIRA by age 120 instead of by age 115. I have no idea how to plan for that change.
I am most certainly basing my financial decisions on what I expect in the next 10 years. Not so much that the RMD tables are changing, but that (a) the tax brackets are expected to revert back to 2017 levels, (b) AMT will be (or may be) a factor again in my case assuming the 2017 tax act is repealed (as stated in the law).

I am doing Roth conversions to the top of the 24% bracket (+9.3% Calif = 33.3% marginal rate). I have difficulty swallowing conversions in the 32% bracket (+9.3% Calif = 41.3% marginal tax rate), but I am considering it. We can't speculate about future tax increases to pay for current spending. Uncertainty in our date of death and future tax rates drives me crazy. I am doing what I can to address the expected tax rates of my wife after I pass (filing single), and heirs after we both pass with the requirement to empty IRAs within 10 years of inheritance.
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djpeteski
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Re: Am I the only one whose taxes increased in 2017?

Post by djpeteski »

Those tax changes worked out really well if:
  • You have little or no itemizable deductions. This would include state taxes (income and property) or mortgage interest expense
  • Have an S or C Corp and pay yourself a small salary and take a high portion of income in dividends
A person with a high W2 salary, high state taxes, and a large mortgage would pay more in federal income taxes under the 2018 plan.

My speculation is that few itemized deductions are here to stay. Both political parties, historically, have sought to simplify the tax process. This is despite the fact that the current administration has promised to do away with all the changes. I also think the increased time to pay back 401K loans is here to stay.
scrabbler1
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Re: Am I the only one whose taxes increased in 2017?

Post by scrabbler1 »

My federal income taxes due were $143 more under the new tax law than they would have been under the old law. This was mainly due to the loss of the personal exemption outweighing the benefits of doubling the standard deduction and lower tax rates. My old itemized deduction was between the old standard deduction and new standard deduction, so doubling the SD didn't help me out too much; my taxable income rose, pushing some my cap gains income from the 0% bracket into the 15% bracket. Most of the remaining ordinary income was already taxed at the (unchanged) 10% amount, so what little got taxed at the new 12% instead of 15% failed to offset the higher amount being taxed.
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El Greco
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Re: Am I the only one whose taxes increased in 2017?

Post by El Greco »

We were right in the "sweet spot" incomewise in a Blue state and the loss of SALT deductions killed our ability to itemize. Our federal taxes increased substantially in 2018 as a result.
TedSwippet
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Re: Am I the only one whose taxes increased in 2017?

Post by TedSwippet »

RetiredCSProf wrote: Wed Jun 23, 2021 10:29 pm Am I the only taxpayer whose federal taxes actually increased in 2017?
A lot of nonresidents saw their US tax increase with the passage of TCJA. For example:

GOP Tax Reform: How It affects International students in the US
1) Personal exemption will be waived in full
This change means that the personal exemption available for all nonresidents to decrease taxable income is reduced from $4,050 in 2017 to $0 in 2018 for all individuals (residents and nonresidents).

In other words, overall taxable income has increased for all nonresidents.
Nonresidents cannot use US standard deductions, so the near-doubling of these in TCJA did nothing to offset this loss of personal exemptions.
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