Have you started taxes yet?

[wgeo]

I don't see taxes as an emotional issue - pretty logical and mathematical to me. I'm pretty capable of seeing the exact dollar amount I paid last year and the exact amount I paid this year, so I would work off the assumption that other adults who are doing their taxes are able to do the exact same thing.

 

[lifesavacation]

I'm concerned for my employees discovering their withholdings don't cover their tax obligation. I did warn everyone, but the response was "but we're not going to have to pay such high taxes with the changes so I'm fine"...sadly they may find out the hard way.

I think it’s kinda hard to know what effect the new tax rules will have on people until they get it down on the 1040. I didn’t change my withholding either. It’s a guessing game at this point. I expect to pay more because it always seems to work out that way.

 

[kdonnel]

I don't see taxes as an emotional issue - pretty logical and mathematical to me. I'm pretty capable of seeing the exact dollar amount I paid last year and the exact amount I paid this year, so I would work off the assumption that other adults who are doing their taxes are able to do the exact same thing.

It is very mathematical, yet over and over in this thread people are comparing the wrong numbers or not taking into account other changes that may have occurred between their 2017 and 2018 tax years.

 

[Christine]

It is very mathematical, yet over and over in this thread people are comparing the wrong numbers or not taking into account other changes that may have occurred between their 2017 and 2018 tax years.

I think comparing your effective tax rate as well as your taxable income between 2017 and 2018 gives a pretty accurate picture of what happened with the changes.

 

[kdonnel]

I think comparing your effective tax rate as well as your taxable income between 2017 and 2018 gives a pretty accurate picture of what happened with the changes.

Your taxable income is not worth comparing if the underlying tax rates have changed.

It would be like comparing the DVC points needed to stay at Aulani with the Marriott Beneficial Interest points needed to stay at Marriott's Ko Olina Beach club. Completely ignoring the buy in cost for each timeshare companies points.

 

[Christine]

Your taxable income is not worth comparing if the underlying tax rates have changed.

It would be like comparing the DVC points needed to stay at Aulani with the Marriott Beneficial Interest points needed to stay at Marriott's Ko Olina Beach club. Completely ignoring the buy in cost for each timeshare companies points.

But the tax law changed my taxable income. Because of the standard deduction, even though I make less money, more of it is taxed. My taxable income increased roughly 5% this year due to me not being allowed to take all of my usual deductions. My effective tax rate was lowered by 2%.

I don't see how you can say that this shouldn't be accounted for.

 

[kdonnel]

I don't see how you can say that this shouldn't be accounted for.

I don't care if my taxable income went up or down, I do care if my effective tax rate went up or down.

 

[longboard55]

what I would like to see is effective tax rate, including FICA tax which is huge for low income, compared to real income including all income plus monetary increase capital gains. I think you would find the middle class is paying more than their fair share. The question is not what tax rate, it is what is taxable income. The richest man in the world, Jeff Bezos has about zero taxable income. Same could be said for the late Steve Jobs.

 

[Christine]

I don't care if my taxable income went up or down, I do care if my effective tax rate went up or down.

I care if my taxable income goes up due to a change in the tax plan that was advertised to be advantageous to the middle class (which I am) that was not advantageous in my case. The change in allowable deductions directly impacted my taxable income. It directly caused an increase of 5% extra of my income being taxed, despite earning less this year (in the past my taxable income would have also decreased). I don't mind if my taxable income goes up because I make more money or I have less deductions. I'm sorry, in my middle-class case, this tax improvement did not work for me. That's great that my effective rate of tax goes down, but it doesn't mean much when what is taxed goes up due to the same laws.

A real tax benefit to the middle class would have been to reduce the effective rates and not hit you on the other side by increasing what can be taxed.

 

[LSUmiss]

I don't see taxes as an emotional issue - pretty logical and mathematical to me. I'm pretty capable of seeing the exact dollar amount I paid last year and the exact amount I paid this year, so I would work off the assumption that other adults who are doing their taxes are able to do the exact same thing.

Right, but, of course, saying it’s “emotional” is a classic way to discredit someone as not rational. So, you probably did get that “tax break” you were promised. You just can’t tell.

 

[LSUmiss]

I don't care if my taxable income went up or down, I do care if my effective tax rate went up or down.

But there are many ppl saying the overall amount paid went up b/c their taxable income went up. If I used to pay 10% on $1, but now I pay 8% on $2. I pay more $ in taxes overall. So, you don’t care if you pay more overall? Am I misunderstanding you?

 

[LongLiveRafiki]

But there are many ppl saying the overall amount paid went up b/c their taxable income went up. If I used to pay 10% on $1, but now I pay 8% on $2. I pay more $ in taxes overall. So, you don’t care if you pay more overall? Am I misunderstanding you?

The effective tax rate is the percentage of tax that you are actually paying and should be what people look at when comparing last year's and this year's taxes. Just looking at the $ amount of the refund or the taxable income doesn't give an accurate comparison between tax years. An increase in taxable income does not automatically mean an increase in what someone overall is paying in tax.

 

[LongLiveRafiki]

I care if my taxable income goes up due to a change in the tax plan that was advertised to be advantageous to the middle class (which I am) that was not advantageous in my case. The change in allowable deductions directly impacted my taxable income. It directly caused an increase of 5% extra of my income being taxed, despite earning less this year (in the past my taxable income would have also decreased). I don't mind if my taxable income goes up because I make more money or I have less deductions. I'm sorry, in my middle-class case, this tax improvement did not work for me. That's great that my effective rate of tax goes down, but it doesn't mean much when what is taxed goes up due to the same laws.

A real tax benefit to the middle class would have been to reduce the effective rates and not hit you on the other side by increasing what can be taxed.

But if your effective tax rate decreased this year, then that means you are paying a smaller percentage of your income in taxes... So hypothetically speaking, if someone had an effective tax rate of 8% last year, then they paid 8% of their income in Federal income tax. If their effective tax rate decreased to 5% this year, then they are only paying 5% in taxes. Despite having a higher taxable income, they are still paying a smaller percentage in taxes.

 

[LSUmiss]

But if your effective tax rate decreased this year, then that means you are paying a smaller percentage of your income in taxes... So hypothetically speaking, if someone had an effective tax rate of 8% last year, then they paid 8% of their income in Federal income tax. If their effective tax rate decreased to 5% this year, then they are only paying 5% in taxes. Despite having a higher taxable income, they are still paying a smaller percentage in taxes.

I don’t think anyone is confused by how it is supposed to work. I think ppl are simply saying the numbers didn’t work in their favor (like they were supposed to). Essentially, for them, the positive of having a lower tax rate did not outweigh the negative of having more taxable income.

 

[LongLiveRafiki]

I don’t think anyone is confused by how it is supposed to work. I think ppl are simply saying the numbers didn’t work in their favor (like they were supposed to). Essentially, for them, the positive of having a lower tax rate did not outweigh the negative of having more taxable income.

Maybe I'm misunderstanding then... What is the negative of having more taxable income if you're paying less in taxes?

 

[kdonnel]

But there are many ppl saying the overall amount paid went up b/c their taxable income went up. If I used to pay 10% on $1, but now I pay 8% on $2. I pay more $ in taxes overall. So, you don’t care if you pay more overall? Am I misunderstanding you?

If I used to pay $2 on $10 in taxable income but now pay $1.75 on $11 in taxable income I don’t care that my taxable income increased.

Comparing your taxable income to 2017 is useless. There are too many variables.

Comparing your effective tax rate is extremely useful to know if you were affected positively or negatively by the changes.

Edited to add: There will certainly be those negatively impacted.

 

[mefordis]

Here is what happened in my case, and we are solidly middle class. We live in a high col area, NJ and we got hit with the elimination of SALT and we can no longer deduct our home equity line interest (which we did the prior years). We did get an increase in our child deductions ($2000 each instead of $1000 each the year before). We did not get to deduct all or our property taxes like the prior year (property taxes cap out at 10k, so we missed out on an additional $6000 deduction). We saw $7000 more in our take home pay, but we did not get the $1500 refund we received the prior year. Instead we paid in $600.

Therefore, we paid $4900 less in federal taxes with the new tax cuts. We were warned that living in NJ we would get soaked for taxes but despite the prior deductions being eliminated, the increase in the child tax credit and the lowering of our bracket allowed us to come out ahead!

PS: another bonus is the elimination of the deductions made doing taxes so easy we did them ourselves, rather than paying $725 to our long time accountant. That saved us another $500.

 

[GreatLakes]

I don't care about adjusted taxable income, what post adjustment rate I get, or any of that crap.

I want to see my top line gross before anything is taken out and the total taxes I pay in the end when you include federal, State, property, FICA, and everything else.

If the flat out percentage goes up or down that is what I care about. I don't care about all the stuff in the middle that changes what is it isn't taxed. That is just adding noise to the equation.

If I made $250,000 straight up gross and end up paying 30% vs 31% I call it a win. If I pay 32% instead I call it a loss.

 

[tinkerdorabelle]

And not to be a downer but aren't these big tax breaks we are all suppose to be getting suppose to end in 2025 what then.

 

[kdonnel]

And not to be a downer but aren't these big tax breaks we are all suppose to be getting suppose to end in 2025 what then.

They will get extended or replaced with something similar.

In politics once you give people something, it is nearly impossible to take it away.