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Professional Analysis of the New Tax Bill
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Redwingtom Offline
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Professional Analysis of the New Tax Bill
12-20-2017 02:41 PM
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RE: Professional Analysis of the New Tax Bill
(12-20-2017 02:41 PM)Redwingtom Wrote:  Individual Tax Changes in the “Tax Cuts and Jobs Act”
Business Tax Changes in the “Tax Cuts and Jobs Act”
S corp, partnership & other changes in the “Tax Cuts and Jobs Act”
Pension and Benefit Changes in the “Tax Cuts and Jobs Act”
Estate and Gift Tax Changes in the “Tax Cuts and Jobs Act”
Foreign Income, Foreign Persons Tax Changes in the “Tax Cuts and Jobs Act”

Enjoy!!

Notable permanent change:
"New law. For tax years beginning after December 31, 2017 (Dec. 31, 2018 for figures that are newly provided under the Act for 2018 and thus won’t be reset until after that year, e.g., the tax brackets set out above), dollar amounts that were previously indexed using CPI-U will instead be indexed using chained CPI-U (C-CPI-U). (Code Sec. 1(f), as amended by Act Sec. 11002(a)) This change, unlike many provisions in the Act, is permanent.
RIA observation: In general, chained CPI grows at a slower pace than CPI-U because it takes into account a consumer’s ability to substitute between goods in response to changes in relative prices. Proponents for the use of chained CPI say that CPI-U overstates increases in the cost of living because it doesn’t take into account the fact that consumers generally adjust their buying patterns when prices go up, rather than simply buying an item at a higher price."
12-20-2017 06:45 PM
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RE: Professional Analysis of the New Tax Bill
Significant changes on T&E in the above links:

"Employer’s Deduction for Fringe Benefit Expenses Limited
Under current law, a taxpayer may deduct up to 50% of expenses relating to meals and entertainment. Housing and meals provided for the convenience of the employer on the business premises of the employer are excluded from the employee’s gross income. Various other fringe benefits provided by employers are not included in an employee’s gross income, such as qualified transportation fringe benefits.
New law. For amounts incurred, or paid, after December 31, 2017, deductions for entertainment expenses are disallowed, eliminating the subjective determination of whether such expenses are sufficiently business related; the current 50% limit on the deductibility of business meals is expanded to meals provided through an in-house cafeteria or otherwise on the premises of the employer; and deductions for employee transportation fringe benefits (e.g., parking and mass transit) are denied, but the exclusion from income for such benefits received by an employee is retained. In addition, no deduction is allowed for transportation expenses that are the equivalent of commuting for employees (e.g., between the employee’s home and the workplace), except as provided for the safety of the employee.
For tax years beginning after December 31, 2025, the Act will disallow an employer’s deduction for expenses associated with meals provided for the convenience of the employer on the employer’s business premises, or provided on or near the employer’s business premises through an employer-operated facility that meets certain requirements. (Code Sec. 274, as amended by Act Sec. 13304)"
12-20-2017 06:57 PM
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RE: Professional Analysis of the New Tax Bill
Some notable business items:
1) Interest deduction is limited to 30% of net income for larger corporations
2) Cash basis accounting has new limitations
3) Net operating losses generally can no longer be carried back, but can be carried forward indefinitely (instead of 2 back, 20 forward)
4) R&D costs now have to be taken over 5 years instead of immediate expense
5) New business credit for paid family leave
6) Domestic Production Activities Deduction is repealed (a tax break designed to make American manufacturers more competitive abroad-apparently the corporate tax cut is viewed as sufficient that it is no longer needed)
7) Sexual harassment payments subject to a non-disclosure agreement are no longer deductible (I'm betting this one has no impact on non-disclosure agreements)
12-20-2017 07:18 PM
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RE: Professional Analysis of the New Tax Bill
What do you guys think the biggest positive is for the average citizen?

I would have to think the doubling of the child tax credit and the fact that a significant percentage is refundable, would be a great selling point to the public at large
12-22-2017 09:07 AM
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RE: Professional Analysis of the New Tax Bill
(12-22-2017 09:07 AM)solohawks Wrote:  What do you guys think the biggest positive is for the average citizen?

I would have to think the doubling of the child tax credit and the fact that a significant percentage is refundable, would be a great selling point to the public at large

In the long run its the cut in the corporate tax rate. The Europeans are already worried they will lose jobs to the US. That tells me it will have an impact.

On a shorter term basis, doubling the standard deduction and lowering rates. Less need to itemize and you pay less tax.
12-22-2017 12:29 PM
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RE: Professional Analysis of the New Tax Bill
(12-22-2017 12:29 PM)bullet Wrote:  
(12-22-2017 09:07 AM)solohawks Wrote:  What do you guys think the biggest positive is for the average citizen?

I would have to think the doubling of the child tax credit and the fact that a significant percentage is refundable, would be a great selling point to the public at large

In the long run its the cut in the corporate tax rate. The Europeans are already worried they will lose jobs to the US. That tells me it will have an impact.

On a shorter term basis, doubling the standard deduction and lowering rates. Less need to itemize and you pay less tax.

Definitely agree about the corporate rate being cut being huge.

However, I don't believe the average citizen will get excited because the corporate tax rate got cut. They will get excited if their child tax credit got doubled. If you are already taking the standard deduction that is crucial too, but if new standard deduction equals what you have been itemizing then its kind of a wash.

That's why I think the GOP should market the doubling of the child tax credit. That effects both sides of the aisle and is something that is hard to argue against.
12-22-2017 01:55 PM
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RE: Professional Analysis of the New Tax Bill
Really trying to kill off itemized deductions. Miscellaneous itemized subject to the 2% floor is suspended. Casualty losses unless it is a federal disaster zone is suspended. Taxes are limited to $10,000. Mortgage interest limited to loan of 750k. Standard deduction goes up to 24k. They tried to kill off the medical deduction but backed off on that.

AMT not really changed that much. For joint returns the exemption is only up from 86,200 to 109,400. The phaseout of the exemption is raised to $1,000,000. That will be some help to the upper middle class. But the lower tax rates will snag some people. A 28% AMT isn't a big deal if you are taxed at 39.6% unless you have a huge number of preference items. But when you are at 22, 24 and 32%, it can have more of an impact. It remains to be seen how much the bite has been reduced.

This section, the 20% deduction for business income in pass through entities, is going to cause massive complexity and lots of planning revenues for accountants and lawyers:
"...New law. Generally for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, the Act adds a new section, Code Sec. 199A, “Qualified Business Income,” under which a non-corporate taxpayer, including a trust or estate, who has qualified business income (QBI) from a partnership, S corporation, or sole proprietorship is allowed to deduct:
(1) the lesser of: (a) the “combined qualified business income amount” of the taxpayer, or (b) 20% of the excess, if any, of the taxable income of the taxpayer for the tax year over the sum of net capital gain and the aggregate amount of the qualified cooperative dividends of the taxpayer for the tax year; plus
(2) the lesser of: (i) 20% of the aggregate amount of the qualified cooperative dividends of the taxpayer for the tax year, or (ii) taxable income (reduced by the net capital gain) of the taxpayer for the tax year. (Code Sec. 199A(a), as added by Act Sec. 11011)..."
12-23-2017 08:51 PM
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RE: Professional Analysis of the New Tax Bill
(12-22-2017 09:07 AM)solohawks Wrote:  What do you guys think the biggest positive is for the average citizen?

I would have to think the doubling of the child tax credit and the fact that a significant percentage is refundable, would be a great selling point to the public at large

Honestly for the average citizen if they do the research the fact that they get to keep more of their money each paycheck. I'm looking at a significant savings and my youngest is 17 THIS year.

Losing the state and local tax credit hurts a little, but honestly by every calculator I have used I'm close enough on just my retirement income plus my wife's salary to be able to justify retiring completely. I'm really only working now to pay our property taxes and hopefully we are selling out soon and moving somewhere the taxes aren't as high so it'll be a big gainer for us. My wife will have a longer commute but she's good with that seeing as I put her through graduate school and always had the longer commute before. Maybe now I can do what I've always wanted to do....be a gentleman farmer. Do enough to stay out of trouble and fund my hunting, fishing, and beer drinking.
12-23-2017 11:42 PM
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RE: Professional Analysis of the New Tax Bill
(12-22-2017 01:55 PM)solohawks Wrote:  
(12-22-2017 12:29 PM)bullet Wrote:  
(12-22-2017 09:07 AM)solohawks Wrote:  What do you guys think the biggest positive is for the average citizen?

I would have to think the doubling of the child tax credit and the fact that a significant percentage is refundable, would be a great selling point to the public at large

In the long run its the cut in the corporate tax rate. The Europeans are already worried they will lose jobs to the US. That tells me it will have an impact.

On a shorter term basis, doubling the standard deduction and lowering rates. Less need to itemize and you pay less tax.

Definitely agree about the corporate rate being cut being huge.

However, I don't believe the average citizen will get excited because the corporate tax rate got cut. They will get excited if their child tax credit got doubled. If you are already taking the standard deduction that is crucial too, but if new standard deduction equals what you have been itemizing then its kind of a wash.

That's why I think the GOP should market the doubling of the child tax credit. That effects both sides of the aisle and is something that is hard to argue against.

It is my opinion that the corporate tax rate cut will in the end be "better" for the American public in general. However, due to what the media feeds them and the general public's reliance on memes and late night comedy to deliver their "news", it's far more likely that they wouldn't know how good a corporate rate tax cut works for them without tossing in the child credits, etc.

In the end though, it's likely that the American public will view this bill quite favorably. Most of America are centrists. If you put more money in their pockets... they'll be happy. This bill stands a good chance of saving the GOP come '18 election day.
12-24-2017 01:06 AM
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HeartOfDixie Offline
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RE: Professional Analysis of the New Tax Bill
There will be massive changes for real estate investments and how they are structured.

Just a year ago one wouldn't even consider utilizing a Corporate structure to hold passive income but under the new law it isn't a bad idea.

This is going to be a great benefit for a lot of states because these holding companies can be more precisely controlled and the investment better manipulated and precise.
01-08-2018 12:05 AM
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Native Georgian Offline
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RE: Professional Analysis of the New Tax Bill
Most of my personal acquaintances are anti-GOP and I’ve made a point to ask as many of them as I can, what is bad about the new tax law, what they don’t like about it, etc.

So far, everyone (6 people) has answered that lowering the corporate rate to 21% and capping SALT at $10k are both terrible ideas. But nobody has mentioned anything else. Which makes me wonder, is the bill non-controversial aside from those two specific provisions?
01-08-2018 12:38 AM
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RE: Professional Analysis of the New Tax Bill
(01-08-2018 12:38 AM)Native Georgian Wrote:  Most of my personal acquaintances are anti-GOP and I’ve made a point to ask as many of them as I can, what is bad about the new tax law, what they don’t like about it, etc.

So far, everyone (6 people) has answered that lowering the corporate rate to 21% and capping SALT at $10k are both terrible ideas. But nobody has mentioned anything else. Which makes me wonder, is the bill non-controversial aside from those two specific provisions?

So they don't like efforts to keep American jobs here and think the well to do need that extra tax break.

And the fact is that the AMT eats up that SALT now unless you are in a really high tax bracket.
01-08-2018 12:16 PM
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RE: Professional Analysis of the New Tax Bill
Come April 2018 what is going to gain a lot of notice is not itemizing.

I was slated to be a loser under the tax bill but the last round of changes have garnered me a cut based on the various calculators.

It will be interesting to see the reaction. Will it be yipiee I don't have to track receipts if we have less than $24,000 in deductions or will it be hey I can't take my $16,000 in deductions any more, they screwed me?
01-08-2018 02:31 PM
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RE: Professional Analysis of the New Tax Bill
(01-08-2018 12:05 AM)HeartOfDixie Wrote:  There will be massive changes for real estate investments and how they are structured.

Just a year ago one wouldn't even consider utilizing a Corporate structure to hold passive income but under the new law it isn't a bad idea.

This is going to be a great benefit for a lot of states because these holding companies can be more precisely controlled and the investment better manipulated and precise.

My 2018 got infinitely busier and less productive due to some of those changes. We just closed a REIT merger and will need to spend months trying to re-negotiating with our investors due to some of the changes in the tax bill.
01-09-2018 10:09 AM
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HeartOfDixie Offline
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RE: Professional Analysis of the New Tax Bill
(01-09-2018 10:09 AM)aTxTIGER Wrote:  
(01-08-2018 12:05 AM)HeartOfDixie Wrote:  There will be massive changes for real estate investments and how they are structured.

Just a year ago one wouldn't even consider utilizing a Corporate structure to hold passive income but under the new law it isn't a bad idea.

This is going to be a great benefit for a lot of states because these holding companies can be more precisely controlled and the investment better manipulated and precise.

My 2018 got infinitely busier and less productive due to some of those changes. We just closed a REIT merger and will need to spend months trying to re-negotiating with our investors due to some of the changes in the tax bill.

We are in much the same boat.

We are going to have a pretty busy year reorganizing various clients that want to take advantage of various aspects.
01-09-2018 10:12 AM
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Redwingtom Offline
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RE: Professional Analysis of the New Tax Bill
(01-08-2018 02:31 PM)arkstfan Wrote:  Come April 2018 what is going to gain a lot of notice is not itemizing.

I was slated to be a loser under the tax bill but the last round of changes have garnered me a cut based on the various calculators.

It will be interesting to see the reaction. Will it be yipiee I don't have to track receipts if we have less than $24,000 in deductions or will it be hey I can't take my $16,000 in deductions any more, they screwed me?

I think you mean April 2019. Although for tax planning purposes, you should still be thinking of next year now. 03-wink
01-09-2018 12:21 PM
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Post: #18
RE: Professional Analysis of the New Tax Bill
(01-09-2018 12:21 PM)Redwingtom Wrote:  
(01-08-2018 02:31 PM)arkstfan Wrote:  Come April 2018 what is going to gain a lot of notice is not itemizing.

I was slated to be a loser under the tax bill but the last round of changes have garnered me a cut based on the various calculators.

It will be interesting to see the reaction. Will it be yipiee I don't have to track receipts if we have less than $24,000 in deductions or will it be hey I can't take my $16,000 in deductions any more, they screwed me?

I think you mean April 2019. Although for tax planning purposes, you should still be thinking of next year now. 03-wink

Correct. Brain gas there. 04-cheers

I have little faith in the American public to grasp that a $24,000 standard deduction is more valuable than itemizing $16,000 in deductions.
01-09-2018 02:02 PM
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RE: Professional Analysis of the New Tax Bill
The more people taking the standard deduction, the less easy it is to create impactful tax laws favoring certain people/groups
(This post was last modified: 01-09-2018 03:34 PM by solohawks.)
01-09-2018 03:33 PM
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RE: Professional Analysis of the New Tax Bill
(01-09-2018 03:33 PM)solohawks Wrote:  The more people taking the standard deduction, the less easy it is to create impactful tax laws favoring certain people/groups

And fewer people need paid assistance to file so not only is it more fair, it's citizen friendly.
01-09-2018 04:22 PM
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