2018 Federal Income Tax (math not politics)

I finished doing my 2017 taxes and was trying to plan my withholding for 2018 when I discovered a change that will affect many who itemize deductions using Schedule A. The elimination of the personal exemption of $4050 in 2018 means that if you itemize you will pay more if your itemized deductions are more than $7,950 which is the difference between the new standard deduction ($12,000) and the repealed personal deduction ($4,050).

For example in 2017 my itemised deduction is around $13,000. The personal deduction is $4,050. My total deduction is the sum, $17,450. In 2018 I will still be able to still deduct the $13,000 but the elimination of the personal deduction means my taxable income will increase by $4,050, so I will pay about $1,000 a year more in taxes.

That sucks. If you don't itemise you will get a small break going from current standard deduction of $6,350 (single) plus the personal deduction of $4,050, total $10,400 to the new 2018 standard deduction of $12,000.

GOP tax plan: Key details of the final bill, explained

Am I wrong?

 

“If you itemize” is an awfully big caveat ...

 

30.1 percent of households chose to itemize their deductions (44 million returns).

Who Itemizes Deductions? - Tax Foundation

 

Does that include mortgage interest? If so, that number likely would be somewhat smaller next year anyway as more goes to the principal and less toward interest.

 

I am a homeowner and live in Cali. A minority of taxpayers itemize, but among those who do I don't think this got much publicity.

If you work with a business/consumer/tax journalist I would appreciate an opinion or a link.

 

Posted this on another thread, but a few tax pros here told us 9 in seminars) the itemized threshold doubled from $12K to $24K. Plus, charitable contributions (Goodwill, Salvation Army, etc) and dues (Chamber, professional alliance) is no longer deductible.

 

Yes I guess I will have to wait and see. What would be cool if you did not have to "do" your taxes once a year. National sales tax anyone?

 

National sales tax? How much would it be? In NJ, sales tax is 7% and the property taxes are among the highest in the nation, so what do you have in mind for the national sales tax?

 

Had a Jersey girl tell me on the phone “Damn your sales taxes are high.”

 

Well that second part isn’t true. But a lot of people who itemized in part because of their charitable contributions will no longer itemize because the standard deduction will be higher. And there’s a limit to how much you can contribute, but it’s like 60 percent of your adjust gross. Few of us will have that problem.

 

My understanding is that under the old tax law you received a standard deduction of $12,700 but you received two individual deductions of $4,050 for a total of $20,800. Under the new law your standard deduction is $24,000 so you receive effectively received an increase in your deductions of $3,200 deduction. But real estate and mortgage interest are limited to $10,000.

So if you paid more than $13,700 in mortgage and property taxes a year then you may well see an increase in your income tax (depending on your other deductions).

Now for a test.

Question

In what states would someone with more expensive home values and higher property taxes live?

Answer

Places with very expensive housing such as California, New York etc.

What states voted for Clinton?

Answer

See above.