the new tax plan - explain something to me (sales, mortgage)

[newdude05]

The new tax plan that was just revealed overall looks better than expected. However some questions:

1) $10,000 SALT deduction allowed - A) does this cover both property tax + state tax deduction, all the news outlet only mentioned property tax not state tax. B) Will you get this deduction only if you itemize or you will get it in addition to the new standard deduction?

2) The top tax bracket of 39.6% went from ~470k income level for family to 1million in income. This is a wtf moment? as that seems to be a clear (and largest) tax break for rich. Even in high cost of living states like ny/nj, if you are making 470k / year as a family you are considered wealthy and doing good. Why are everyone making 470k-990k getting this tax break? Why didnt they leave it as it is like for single filers at ~500k and get more money to cover the tax cuts and wont be labeled as tax cut for the rich. Makes no sense to me.

3) 500k limit on mortgage interest - good! if you are taking out more than 500k mortgage you dont need the deduction.

What are your thoughts?

[vfrex]

1. Only property tax, not state. You only get the benefit if you itemize.
2. No real opinion there.
3. That wasn't really a question, but consider it this way. People buy homes that fit their budget / affordability plays a huge role. Changing the rules in the middle of the game that hurts the players is usually poorly received. Also, property values are driven by density and we are the most dense state in the country. So we are disproportionately impacted by the limitation of that deduction. And I haven't seen any indication that it is indexed to inflation, so as long as NJ is getting more expensive as it will over time, more middle class NJ residents will be impacted.

[newdude05]

Originally Posted by vfrex

1. Only property tax, not state.

Hi, thanks for the response. Are you sure on this point? Does that mean state tax deductions are essentially gone if the tax plan passes as it is?

EDIT nm you are correct. CNN clarified

Repeals state and local tax deductions, but preserves property tax break: The original GOP proposal was to fully repeal the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes. But it was met with strong opposition from lawmakers in high-tax states and cities.
So Brady made a concession. The House bill restores an itemized property tax deduction for property taxes up to $10,000.

[Marc Paolella]

Originally Posted by newdude05

Hi, thanks for the response. Are you sure on this point? Does that mean state tax deductions are essentially gone if the tax plan passes as it is?

Yes. No more income or sales tax deduction at all. And they say they are increasing the standard deduction, but they are also eliminating the personal exemption. So they are not really "doubling" the standard deduction in real terms. They are also proposing to NOT INDEX the $10,000 property tax limit. That means each year the property tax deduction is slowly being phased out without them having to say it.


We need to fight the keep the SALT deduction as is, and remove the $10,000 limit if we cannot save the entire deduction.


They are also repealing the ATM, which is excellent, and repealing the estate tax, also good although it doesn't affect many people of ordinary means.


They are also proposing a cut to corporate taxes. But there is NO SUCH THING as corporate taxes. All corporate taxes are basically paid for by you and I in the form of higher prices on goods and services. The corporate income tax is a hidden ADD-ON CONSUMPTION TAX that we all pay as individuals.

[Robert137]

Originally Posted by vfrex

1. Only property tax, not state. You only get the benefit if you itemize.
2. No real opinion there.
3. That wasn't really a question, but consider it this way. People buy homes that fit their budget / affordability plays a huge role. Changing the rules in the middle of the game that hurts the players is usually poorly received. Also, property values are driven by density and we are the most dense state in the country. So we are disproportionately impacted by the limitation of that deduction. And I haven't seen any indication that it is indexed to inflation, so as long as NJ is getting more expensive as it will over time, more middle class NJ residents will be impacted.

According to a news article, Fox I believe, existing mortgages aren't affected.

[hackwriter]

Originally Posted by Robert137

According to a news article, Fox I believe, existing mortgages aren't affected.

Existing mortgages will be affected. If you are paying $500,000 a year in mortgage interest (not the amount of your mortgage, the amount of interest you pay) you will be affected.

As someone else noted, you lose the personal exemptions. This means that a family of 4 which might have 4 personal exemptions will not have none. So the bigger your family, the less that "doubling" of the standard deduction benefits you.

Medical expenses will no longer be deductible.

This is a massive screw-job on middle class families, especially those in states like NJ. But that is what it was designed to do -- stick it to the poor and people in blue states. The logic is that they'll change it once you become more like Alabama -- poor, stupid, and theocratic.

[DefiantNJ]

Originally Posted by newdude05

The new tax plan that was just revealed overall looks better than expected. However some questions:

2) The top tax bracket of 39.6% went from ~470k income level for family to 1million in income. This is a wtf moment? as that seems to be a clear (and largest) tax break for rich. Even in high cost of living states like ny/nj, if you are making 470k / year as a family you are considered wealthy and doing good. Why are everyone making 470k-990k getting this tax break? Why didnt they leave it as it is like for single filers at ~500k and get more money to cover the tax cuts and wont be labeled as tax cut for the rich. Makes no sense to me.

You are not the only non rich person who does not understand this gift to the rich. The party in power needs to do something to thank their donors for paying to elect them. In addition to allowing them to poison the air and water which they do through the EPA. And of course killing Obamacare which is still work in progress...

Originally Posted by newdude05

3) 500k limit on mortgage interest - good! if you are taking out more than 500k mortgage you dont need the deduction.

What are your thoughts?

Very bad for NJ. Livable houses in Northern NJ are way more expensive than 500K.


In addition though, I read that they are planning to abolish AMT. Another giveaway to the upper middle class/rich.

[vfrex]

Originally Posted by Robert137

According to a news article, Fox I believe, existing mortgages aren't affected.

That is my understanding, yes. But, that means when people who own houses today go to sell, the buyer is playing by different rules that diminish the value of the asset. Does that make sense?

[Metsfan53]

Originally Posted by newdude05

Hi, thanks for the response. Are you sure on this point? Does that mean state tax deductions are essentially gone if the tax plan passes as it is?

EDIT nm you are correct. CNN clarified

Repeals state and local tax deductions, but preserves property tax break: The original GOP proposal was to fully repeal the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes. But it was met with strong opposition from lawmakers in high-tax states and cities.
So Brady made a concession. The House bill restores an itemized property tax deduction for property taxes up to $10,000.

only works if you are going to itemize. Eliminating state taxes, medical expenses, educational credit, employee paid expenses, adoption credits, credits for seniors on disability, and personal exemptions pretty much means nobody will itemize anymore. so in fact it's pretty much gone anyway.

[Metsfan53]

Originally Posted by Marc Paolella

Yes. No more income or sales tax deduction at all. And they say they are increasing the standard deduction, but they are also eliminating the personal exemption. So they are not really "doubling" the standard deduction in real terms. They are also proposing to NOT INDEX the $10,000 property tax limit. That means each year the property tax deduction is slowly being phased out without them having to say it.


We need to fight the keep the SALT deduction as is, and remove the $10,000 limit if we cannot save the entire deduction.


They are also repealing the ATM, which is excellent, and repealing the estate tax, also good although it doesn't affect many people of ordinary means.


They are also proposing a cut to corporate taxes. But there is NO SUCH THING as corporate taxes. All corporate taxes are basically paid for by you and I in the form of higher prices on goods and services. The corporate income tax is a hidden ADD-ON CONSUMPTION TAX that we all pay as individuals.

can't believe we actually agree on a political/economic issue here. Gives me hope that this is dead in the water....