New (potential) Tax Law and Exemptions

[Crank]

Ive been wondering about the proposed new tax law and the elimination of the personal exemption where dependents are over the age of 18 and dont qualify for the new 2000 child tax credit.

Example: MFJ with one dependent > age 18

1. Increase in standard deduction results in reduced taxable income of $11300 (24000-12700)

2. Loss of 3 personal exemptions results in increased taxable income of $12300 (4100*3)

Net increase in taxable income of $1000.

Is this correct?  If so it would increase with each additional dependent.

 

[Jack from Ohio]

[Lee B]

Their is a new $ 500 credit available for dependents who no longer qualify for the CTC.

Also the old 10%/15%/25% brackets are now 10%/12%/22%.

The results vary client by client.

 

[Crank]

Ahh I missed that.  Thanks for the reply!

Jack, as usual, you are extremely helpful 

[BulldogTom]

We are all going to be looking for all the new rules.   That $500 credit is going to be one of the things we are going to have to look up the rules for.

 

Tom
Modesto, CA

[Jack from Ohio]

7 minutes ago, Crank said:

Ahh I missed that.  Thanks for the reply!

Jack, as usual, you are extremely helpful 

Everyone seems to ignore the facts.  

There have been no tax law changes yet.  The process of passing the Senate is a minefield, and the bill will not be the same as it is now.

Why waste time "assuming" what will be in the bill.  There is also a strong movement to prevent its passage.  I have better things to do than play "What If?"

Once the bill is signed, I will be in it up to my ears.  I prefer not to play with political gossip.  All talk BEFORE the bill is signed is just gossip.

[Crank]

Well, first of all it wasnt an assumption.  It was a question based on the information that has been provided (mostly by the media) so far as the proposed tax changes.  Last I checked this was a forum for the discussion of income taxes.  That should include present tax law as well as proposed tax law.

If you have better things to do then why did you bother to grace me with your brilliant reply?

 

[SaraEA]

Got a message from a client today and had to deliver BIG bad news.  Face it you naysayers, this tax bill is going to pass just as soon as the writers remove the things in it that aren't related.  My client lives and works in NYC, rents so really has no deductions except charities and state and local taxes.  Those taxes amounted to $90k in 2016 and will be a bit higher in 2017.  In 2018 they will be limited to $10k, so the couple won't even itemize.  Going from 39.6% to 37% tax rate isn't going to make up that difference.

[jklcpa]

" this was IS a forum for the discussion of income taxes.  That should include present tax law as well as proposed tax law."

^^ That is correct. It's understandable that some members may want to discuss this act's potential impact, and the title is perfectly clear so that anyone wishing to avoid discussions of pending legislation may easily do so.

In all likelihood the legislation will pass and if that is the case, some of us will be doing more last minute tax planning to advise our clients on some of these changes. For those that have some time and don't mind the early effort, I don't think it hurts to get a start on understanding its complexities and effects so that we aren't starting from scratch days from now since we are so close to year end as it is.

[NECPA in NEBRASKA]

Whether it passes or not, I'm being inundated with calls and questions. I answer them with what is current law and what is proposed as of today. I already gave heads up to my business clients that use entertainment a lot, so that they would at least be aware of the possibility of a change as of 1/1/18.  I was not aware of that proposed change until this weekend. If it does not pass, no harm done.

[Jack from Ohio]

I choose not to have to backpedal, once the bill is passed, if it does.

[Medlin Software, Dennis]

I bet within a day (working day) of the signature, the IRS will release new withholding calculations, like happened at least one other time the rules were changed late in the year.  The IRS already likely has people, if not directly ordered, wisely reviewing and preparing, just like some here choose to do.  For the common folk, the withholding changes are what they wait for (and what the President keeps touting - paycheck changes).  The rest can be worked through.  Those that have means to shuffle income and expenses, are wisely looking at what will likely pass, and will have a signature (or not) by the end of the week.  That leaves a few working days to shuffle.

There was, today I believe, a procedural fix, which was likely the last Dem grasp at straws for their next campaign literature.  I have seen nothing about any possible last minute issue.  Also, the ability of McCain to go home, rather than stay, likely tells the outcome will not require his vote, or the VP vote.

But, anything can happen, even just before signing, or just after, so every day is a new adventure.

The interesting part is the daily questions I get asking why "I" do not already know the 2018 withholding calculations.

[BulldogTom]

14 hours ago, Jack from Ohio said:

Everyone seems to ignore the facts.  

There have been no tax law changes yet.  The process of passing the Senate is a minefield, and the bill will not be the same as it is now.

Why waste time "assuming" what will be in the bill.  There is also a strong movement to prevent its passage.  I have better things to do than play "What If?"

Once the bill is signed, I will be in it up to my ears.  I prefer not to play with political gossip.  All talk BEFORE the bill is signed is just gossip.

Senate approved early this morning (1 AM).   House voting today after technical corrections.  Expected to pass.  President has indicated he will sign before Christmas.

You fought the good fight on this on Jack, but it is happening.   As soon as Corker and Rubio signed on, it was going to be a done deal.

I made 4 calls last night to clients who will be affected.   I will continue to review my clients situations and make pro-active calls to those that I think will be most affected under the new law.  The rest I will discuss when I sit down with them to prepare their 2017 returns.

Tom
Modesto, CA

[Randall]

3 hours ago, BulldogTom said:

You fought the good fight on this on Jack, but it is happening.   As soon as Corker and Rubio signed on, it was going to be a done deal.

Yes, while they were hashing it out the past few months, I didn't pay much attention.  But once the joint committee approved and Corker & Rubio got on board, it was highly probable.  Senate has passed it, House will re-vote today.  President will sign.  It's time to review it and discuss it.  I received a summary from Parker after the joint committee approved it and skimmed thru it, the first time I gave it any attention.