Article on this year's tax returns

oski003
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https://www.msn.com/en-us/money/taxes/shrinking-tax-refunds-cast-a-shadow-on-trumps-signature-law/ar-BBUNH0w?li=BBnbfcN

There has been a lot of chatter on this board implying that the tax changes were largely for the benefit of the wealthy. Upper middle class with high local taxes and heavy mortgage /property tax deductions will likely not benefit. Most everyone else should. You will also not "benefit" if you would rather be given a $1000 tax return instead of paying $100 less in taxes each month.
dajo9
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There is a difference between using the word "sole" and the word "disproportionate"
oski003
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Changed to largely. Of note, criticism of the tax plan largely ignores the benefits the other 95% are receiving.
golden sloth
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Quote:

Only one in five U.S. taxpayers expect to pay less income tax this year as a result of the tax reform law passed in 2017 by Republicans who promised big savings for everyday Americans, according to a Reuters/Ipsos opinion poll released on Friday.

The poll suggested that the tax overhaul, mostly geared to helping businesses, may not be as strong a 2020 campaign talking point as Republicans and President Donald Trump had hoped.

The March 6-11 survey found about 21 percent of adults who had either filed their taxes or planned to said "the new tax plan that Congress recently passed" would let them pay less this year; about 29 percent said they would pay more; 27 percent said there would be no impact; 24 percent said they were not sure.

Though it should be noted, that I'm not sure the people who were polled had all completed their tax filings, and in which case I say 'Who cares what they think they'll get, find out what they actually do get and evaluate it'.

https://www.reuters.com/article/us-usa-tax-survey/few-americans-see-savings-from-trumps-tax-reform-reuters-ipsos-poll-idUSKCN1QW1BY
dajo9
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One of the most insidious parts of the tax cut is that it lowers the inflation rate at which tax brackets grow. This technical subterfuge is actually a hidden tax increase on everybody who pays individual income taxes. Note, it does not impact the corporate tax rate which is a flat percentage.

Because of this hidden tax increase, by 2027, 53% of Americans will pay higher taxes than under previous law, while the top 20% receives a boost of 107% of the total tax benefit (above 100% because of the lower income people paying higher taxes). That is because most of the tax cut expires after 2025 except for two parts. The new lower corporate tax rate and this hidden tax increase on individuals, which monetarily offset each other. In other words, the tax "cut" is actually just a long-term transfer of money from individuals to corporate owners.

In the short term, the top 5% receive 43% of the benefit in 2018. It's a big scam. They dupe the public with shiny year 1 numbers only to gradually take it away. The 1% play the long game.

https://www.vox.com/policy-and-politics/2017/12/18/16791174/republican-tax-bill-congress-conference-tax-policy-center
sycasey
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oski003 said:

Upper middle class with high local taxes and heavy mortgage /property tax deductions will likely not benefit.
sycasey
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Anyway, reading over the articles, it's hilarious to me that the GOP thought they would be able to message this well. If your plan involves having to explain complicated math to people, it definitely won't play. It's a bit like Obamacare in this way, only Obamacare actually did benefit most people in the long run and this will get worse in the long run.
sp4149
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sycasey said:

oski003 said:

Upper middle class with high local taxes and heavy mortgage /property tax deductions will likely not benefit.

There are some pretty heavy hits on single seniors as well.
We were itemizing when my wife passed away.
Loss of itemized deductions increased my taxable income by
$15,000 which also pushed my tax rate higher than in 2017,

Increased Adjusted Gross Income due to loss of deductions
and higher tax rate equals a tax increase for single households
and especially senior households without dependent kids.

The IRS reports that tax return filings are lower than previous years.
Hopefully they can figure out why...
In my case since my Federal taxes tripled and instead of getting a major
refund I owe as much as my 2017 refund I won't be filing until the 14th of April
(giving myself an extra day in case of computer glitches when filing)
Somehow I would expect that other victims of the GOP tax cut will
also wait until the last minute.

Note the rest of my income tax increase is due to the fact that last year
I turned 70 had to withdraw funds from my late wife's IRA which pushed
me into yet another higher tax bracket. This had been anticipated but I didn't
expect to lose most of my itemized deductions so with holdings were at
too low a level.
oski003
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The Tax Cuts and Jobs Act of 2017 suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer's home that secures the loan.

Your specific deduction is no longer allowed. Not being able to make this specific deduction takes away one of the tax advantages that property owners have, who are generally more wealthy. Items like this are supposed to be balanced by a higher general deduction which help those who do not itemize and/or own property, such as lower middle class and poor people.

With that being said, it sucks to pay more in taxes, especially when you do not anticipate having to do so. I totally understand why you would dislike the Act.
sp4149
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oski003 said:

The Tax Cuts and Jobs Act of 2017 suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer's home that secures the loan.

Your specific deduction is no longer allowed.

The one question for 2019 is that of refinancing my mortgage. My limited logic is that I will be buying the old mortgage on the house and that would mean I would then have interest based on a mortgage used to buy the house.

Today on Intuit (Turbo Tax) I found this answer.

The new legislation wiped out the deduction for home equity debt, including on existing loans. If you refinance your mortgage to include the payoff of the HELOC you can deduct mortgage interest up to a maximum of $750,000 of mortgage debt that was used to purchase or improve the home as an itemized deduction.

A lot of low cost refinancing available now. My mortgage is $350K on appraised vlaue of $700K.
Next month SDG&E is boosting my electrical rates to pay off it's obligation in the SoCal Edison San Onofre reactor failure. It appears I could refinance for about $380K, pay off the old mortgage and buy a solar system to get away from high ($500+/month) SDG&E electric bills and all the mortgage interest would be deductible.

The tax law appears to force homeowners in California (and other high real estate markets) to refinance to Save $3-4K a year in income taxes. I still won't be able to deduct state and local taxes in full, but adjusting my taxable income downward may save on state income tax as well. I guess the Jobs Act portion was to create work in mortgage refinancing.
oski003
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I don't follow your logic at all. I believe what you are saying is the following:

1) You have are paying interest on a non-deductible loan.
2) However, you can refinance your house and use the money to pay off that loan.
3) Therefore, this results in creating jobs in home refinance.

Is that correct? The stuff on solar just convolutes the refinancing discussion.
oski003
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old rule:
https://www.mortgageloan.com/tax-rules-for-home-equity-loans

The main difference is your situation where you used a home equity line of credit to purchase or improve a second home, which is the situation no longer allowed, correct?
sp4149
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oski003 said:

old rule:
https://www.mortgageloan.com/tax-rules-for-home-equity-loans

The main difference is your situation where you used a home equity line of credit to purchase or improve a second home, which is the situation no longer allowed, correct?
Yes, However what I was reading is that if you refinanced a Home Equity loan as a prime mortgage loan the interest is deductible.

An analogy would be buying a house with an existing mortgage. In order to gain title you have to pay the entity holding the mortgage and the home owner. Buying out the mortgage holder with a refinanced loan is buying out one of the title holders.

I can see a couple of problem areas:
Refinancing with the same mortgage holder (AKA Wells Fargo has offered to refinance with them)
Increasing the loan principal to purchase a solar power system may complicate things.

When I refinance in 2011 I used the money to purchase a second home.
In this case I would be refinancing to purchase the mortgage on my prime house from Wells Fargo Bank, so the mortgage is being used to purchase title from Wells Fargo of the house securing the loan.
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