Tax changes and college kids

[DawnM]

I may need to get this removed because the article keeps saying "GOP tax bill" but Obamacare was discussed on the boards, so I would think we can at least discuss the tax bill (proposed.)

 

https://www.washingtonpost.com/news/wonk/wp/2017/12/19/the-gop-tax-plan-has-a-nasty-surprise-for-upper-middle-class-parents-with-kids-in-college/?utm_term=.5f2d7a832b4f

[Crimson Wife]

Well, I happen to believe that the tax code should not reward parents who allow their able-bodied adult offspring to mooch off of them. Elderly and disabled relatives should qualify for the same tax credit as minor children IMHO. But nobody else should get a tax credit.

 

Just because a parent has decided to allow an able-bodied 20something to live with him/her does NOT mean that the tax code should reward that decision.

[DawnM]

Well, I happen to believe that the tax code should not reward parents who allow their able-bodied adult offspring to mooch off of them. Elderly and disabled relatives should qualify for the same tax credit as minor children IMHO. But nobody else should get a tax credit.

 

Just because a parent has decided to allow an able-bodied 20something to live with him/her does NOT mean that the tax code should reward that decision.

 

Good grief!  Got it.  I am enabling moochers.  

[justasque]

Well, I happen to believe that the tax code should not reward parents who allow their able-bodied adult offspring to mooch off of them. Elderly and disabled relatives should qualify for the same tax credit as minor children IMHO. But nobody else should get a tax credit.

 

Just because a parent has decided to allow an able-bodied 20something to live with him/her does NOT mean that the tax code should reward that decision.

 

I am confused.  The article is about college students.  Do you consider able-bodied college students, age 7-24, who live at home with their parents during breaks and the summer, to be mooching off their parents?  

[Butter]

Just because a parent has decided to allow an able-bodied 20something to live with him/her does NOT mean that the tax code should reward that decision.

 

20somethings who are currently attending college are mooching off their parents?!?!

[justasque]

Well, I happen to believe that the tax code should not reward parents who allow their able-bodied adult offspring to mooch off of them. Elderly and disabled relatives should qualify for the same tax credit as minor children IMHO. But nobody else should get a tax credit.

 

Just because a parent has decided to allow an able-bodied 20something to live with him/her does NOT mean that the tax code should reward that decision.

 

I am also curious why a parent wouldn't allow an able-bodied college student to continue to live with them (the parent), assuming the student treats the parents and the home with a reasonable amount of respect, and is taking their studies seriously. 

 

In my social circle, I can't think of anyone who has chosen not to allow their dc to live at home on college breaks, and in some families the college student lives at home full time.

 

 

[maize]

The article is behind a paywall, would someone with access care to summarize?

[justasque]

The article is behind a paywall, would someone with access care to summarize?

 

Changes to the tax code (as per the new GOP tax bill) will raise taxes for middle-class families who have one or more children (age 17-24) in college.

 

  

[Arcadia]

The article is behind a paywall, would someone with access care to summarize?

From another article “Final Tax Bill Hits Parents of College Students Harder than Other Taxpayers†that is based on the one OP linked. This one is not behind a paywall https://itep.org/final-tax-bill-hits-parents-of-college-students-harder-than-other-taxpayers/

 

“The current tax rules generally allow parents to claim a child as a dependent until the child turns 19— or until the child turns 24 years old if he or she is a full-time student. This means that under current law, parents of a child in her last years of high school or in college can claim a personal exemption for her as a dependent. In 2019, each personal exemption will shelter $4,250 of a family’s income from tax. The final bill eliminates the personal exemption.

 

For many families with younger children, the loss of the personal exemption would be at least partially offset by the bill’s increase in the child tax credit. But that does not help parents of older children. The child credit is only available for children age 16 or younger, and the final bill does not change the eligibility age.â€

[DawnM]

Here is the article:

 

As Congress votes on a bill overhauling the tax code Tuesday, many parents of college-age children appear to be in store for an unexpected surprise -- one that could result in a tax hike.

The Republican plan makes a series of complex changes to the tax code that, in the end, appear to cost these parents more.

The tax bill nixes the standard exemptions every taxpayer gets to take, while doubling both the standard deduction and the child tax credit.

 

 

It sounds good, but there is a hole that could trap parents just as their children are racking up big college tuition bills -- one that doesn't appear to be intentional.

"I don't think they gave it a lot of thought," said Steve Wamhoff, senior fellow for federal tax policy at the Institute on Taxation and Economic Policy.

Currently, all parents can take a $4,150 tax exemption for each child up to age 19 or up to 24 if the child is in college. That reduces taxable income. For someone in the upper middle-class, who faces a marginal tax rate of 25 percent, that's a $1,038 reduction in annual federal taxes for each child.

 

But the GOP bill kills off exemptions. They are replaced, in part, with a larger standard deduction and a bigger child tax credit. There's also a new $500 family tax credit for dependents, including children, who are too old to qualify for the child tax credit.

For parents with children younger than 17, the changes are all a bit of a wash or even work out to a tax cut.

The pain point could be for families with dependent children 17 to 24 years old. The math works out less kindly for them. No one gets personal exemptions, and their children no longer qualify for a child tax credit, but the new family tax credit is much smaller.

So a married couple with very low income -- under $30,000 -- and two college-age children wouldn't see a big change, said Elaine Maag, senior research associate at the Tax Policy Center. In this case, the changes to the tax code mostly work out for them.

But a married couple with $100,000 in annual income and kids in college could face problems. The tax code changes end up covering only part of their first college student -- compared to the tax benefit today.

 

Two kids in college? Then the parents lose out -- and end up potentially paying $500 to $1,000 or more in taxes. It's hard to say with precision because of the tax bill's host of changes.

So the changes proposed in the GOP tax bill would likely lead to a tax hit for, at the very least, upper middle-class parents of children in college.

And it will hurt more in the future. The current personal and dependent exemption is tied to inflation. It rose $100 from 2016 to 2017. But the proposed tax credits are not. So they will only get less valuable in the future, raising the tax burden for families.

Maag said she considered a tax credit to be more fair than a tax exemption for children because it gives the same tax benefit no matter how much the parents earn.

But that means some parents will lose out. And those are concentrated in the upper middle class.

With college tuition costs spiraling upward and college affordability already a hot topic, this is one tax move that could make that problem worse.

Edited December 21, 2017 by DawnM

[maize]

Thanks Dawn.

 

I really wonder why they went and cut exemptions.

 

I guess a somewhat higher dependent credit could help those who are hurt by this?

 

We're not likely to get out of the 12% tax bracket anytime soon, so the credit would mostly make up the difference for us. Of course that also means we have a lot less money to work with in the first place.

Edited December 21, 2017 by maize

[Crimson Wife]

I don't believe people should get exemptions or credits for their children unless those children are minors or disabled. Once an able-bodied individual turns 18, then he/she is an adult and the parents no longer have any legal obligation to support them.

 

If parents want to help out an adult son or daughter by assisting with college or allowing him/her to continue living at home, then that's the parents' prerogative (we plan to continue helping out with college assuming decent academic performance) but why should the IRS give a tax break for it?

 

 

[Crimson Wife]

FWIW, I also think that the financial aid system needs to make it easier for students aged 18-23 to get "independent" status. I believe in treating young adults as adults and not adolescents.

[creekland]

I don't believe people should get exemptions or credits for their children unless those children are minors or disabled. Once an able-bodied individual turns 18, then he/she is an adult and the parents no longer have any legal obligation to support them.

 

If parents want to help out an adult son or daughter by assisting with college or allowing him/her to continue living at home, then that's the parents' prerogative (we plan to continue helping out with college assuming decent academic performance) but why should the IRS give a tax break for it?

 

Because as a whole statistic-wise (meaning there can be individuals who don't fit this, but most do), more education produces less unemployment and higher wages once employed.  This benefits the country in the long run with higher tax income and fewer on public assistance.

 

The wealthy, of course, can afford it all on their own and don't need this so naturally it didn't stay in the plan.  They didn't even think about it and didn't allow time for others to find it and bring it to their attention.

[maize]

FWIW, I also think that the financial aid system needs to make it easier for students aged 18-23 to get "independent" status. I believe in treating young adults as adults and not adolescents.

You are saying you want them to be dependent on financial aid rather than dependent on their parents?

 

Dependent on taxpayer money/university donor money?

 

How is this less dependent?

[Arcadia]

The PROSPER Act document is 542 pages long and I don’t know how accurate this Time article is but it does talk about changes to FAFSA.

http://time.com/money/5045264/house-republicans-college-student-financial-aid/

“7 Drastic Ways the GOP Is Trying to Change How You Pay for College

 

1. There would be big changes ahead for both federal loans and grants.

 

House Republicans want to simplify student aid by eliminating multiple grants and loans, and replacing them with a single option.

 

For grants, that option would be the federal Pell grant; the bill would eliminate other, much smaller grant programs such as Federal Supplemental Educational Opportunity Grant. And for loans, a new Federal “One†Loan would replace the federal Direct and Perkins loans available currently. The loan change would eliminate provisions for subsidized loans, which go to needy students and don’t accrue interest while borrowers are enrolled in schools.

...

The formula for interest rates remains the same under the House bill, but the bill would eliminate origination fees—currently 1% for undergraduate borrowers and 4% for graduate students and parent borrowers.

 

2. Both students and parents would face new borrowing limits.

 

The act introduces new caps for how much students and their parents are allowed to borrow.

 

At the undergraduate level, the limit increases by about $2,000 a year for so-called dependent students (usually those who are still claimed as dependents on their parents’ tax returns). In total, these students would be able to borrow about $8,000 more, for a limit of $39,000. For independent students (generally students older than 24), the limit would increase by about $2,750, to $60,250.

...

The bill lowers the limits, however, for federal parent loans, which are frequently criticized for letting parents overborrow. Currently, parents can borrow up to the full cost of education; the program lends to anyone without an “adverse†credit history, such as a recent bankruptcy. That means, in theory, that a parent could take on more than $200,000 for a single child to attend a four-year private college. The new bill would significantly cut that back, introducing annual limits of $12,500 per student, with an aggregate limit of $56,250.

 

Graduate students would also get borrowing caps, which would be set at $28,500 annually, for a total of $150,000. (One exception is for medical students, who would get a separate, higher limit.)

 

3. The FAFSA would get at least a bit simpler.

...

The bill would also allow for the use of older tax information to fill out the FAFSA—something that the Department of Education allowed this year, but would now be written into law.

 

The bill allows more families to qualify for a simplified version of the form by raising the income limits. Currently, families with an adjusted gross income below $50,000 fill out a shorter form that doesn’t ask about financial assets. The bill would increase that limit to $100,000.

...

4. Work-study dollars would get calculated differently.

 

The bill would change the allocation of federal work-study money over the next several years, shifting more funds to schools with greater student financial need and more Pell grant recipients. That would end a formula that is widely considered outdated, which awards a disproportionate amount of money to private colleges with wealthier students.

 

The bill also eliminates work-study aid for graduate students, limiting it to undergraduates, and would award additional money for colleges with either strong completion rates for Pell grant recipients or strong year-over-year improvements in graduation rates.

 

5. Grant recipients would get bonuses for heavier courseloads.

 

Pell grant recipients who enroll in 15 credits per semester—a courseload that puts them on track for four-year graduation—would be eligible for a $300 bonus per term. That’s greater than the 12 credits that are usually considered full-time, but students who only take 12 credits during each fall and spring semester would need more than four years to graduate.

...

6. There would be fewer loan repayment options.

 

There’s wide agreement that the current maze of student loan repayment options is too confusing and complex for borrowers to navigate. There’s considerable debate, however, on how best to fix that.

 

House Republicans want to slim eight different plans into two: a standard 10-year repayment plan and one income-based repayment plan.

...

7. Consumers would get more information, even before applying.

 

Several of the bill’s provisions are aimed at increasing transparency for college students and applicants.

 

The bill would require the Education Department to give high school sophomores an idea of their aid eligibility, for instance, which could help students shape their college search process.

 

Republicans also want to continue the work carried out by the College Navigator and College Scorecard websites, which currently provide families with information about net price, graduation rates, and loan repayment rates for all colleges. The bill would expand that information to include median salaries and repayment rates by program level, as opposed to only at the college level.â€

 

ETA:

From University of Florida’s article 5 WAYS THE PROPOSED PROSPER ACT COULD IMPACT STUDENTS

“#1. PELL GRANT AWARD WON’T CHANGE BUT MAY COME WITH A BONUS

If you receive the Pell Grant, your award will remain the same. If you want more money, you will need to take 15 credits per semester.

...

#2. LARGER LOANS FOR UNDERGRADUATES, BUT LIMITS FOR GRADUATES AND PARENTS

Dependent undergraduate borrowers will see an increase in annual federal loan limits – from $5,500 to $7,500. What is unknown, however, is whether this access to larger loans will encourage schools to increase undergraduate tuition and fees.

 

Graduate students will see their loan limits set at $28,500, as opposed to the current limit, which is the total cost of attendance. For parents, the loan limit would be set at a flat rate of $12,500, as opposed to the current limit, which is the cost of attendance wherever their child attends college.

...

#3. STUDENT AID WILL FEEL MORE LIKE A JOB

PROSPER proposes additional investments in programs designed to increase connections between job-related skills and a college degree. For example, the legislation would increase available funds for undergraduates through the Federal Work Study program by phasing out graduate student eligibility. It also calls for the creation of an Apprenticeship Grants program focused on business-to-institution partnerships and provides access to Pell Grants for students who are pursuing short-term, certificate or vocational programs.

...

#4. FEWER LOAN REPAYMENT OPTIONS WILL BE AVAILABLE

Unlike the current six options to repay student loans, PROSPER would streamline repayment options to two. The first option would be a standard 10-year repayment. The second would be income-driven repayment, or IBR.

...

#5. GOING INTO PUBLIC SERVICE WILL HAVE FEWER BENEFITS

Public service careers will revert to being a more altruistic career choice. That’s because in prior years, students who went into public services jobs, or even specific K-12 teaching jobs, could receive loan forgiveness as part of their service to the public. However, the PROSPER Act proposes to eliminate all public service loan forgiveness programs and priority targeted grant programs.†http://news.ufl.edu/articles/2017/12/5-ways-the-proposed-prosper-act-could-impact-students.php

Edited December 21, 2017 by Arcadia

[justasque]

I don't believe people should get exemptions or credits for their children unless those children are minors or disabled. Once an able-bodied individual turns 18, then he/she is an adult and the parents no longer have any legal obligation to support them.

 

If parents want to help out an adult son or daughter by assisting with college or allowing him/her to continue living at home, then that's the parents' prerogative (we plan to continue helping out with college assuming decent academic performance) but why should the IRS give a tax break for it?

 

 

FWIW, I also think that the financial aid system needs to make it easier for students aged 18-23 to get "independent" status. I believe in treating young adults as adults and not adolescents.

 

Crimson Wife, I am trying to understand your position.  I'm hearing that you feel that supporting kids who are in college is legally optional for parents, so even though most college students are dependents, since they have the option of dropping out of school and getting a full-time job (and thus not having to mooch off their parents), there should be no tax break for their parents.  At the same time, you feel it should be easier for the students to get independent student status, so that they qualify for more financial aid.

 

Wouldn't this then result in fewer parents giving financial support to their students, and more students getting financial aid from the taxpaying neighbors (aka government) instead?  And wouldn't this then move the student from mooching off their parents to mooching off their taxpaying neighbors?  And perhaps more students dropping out to work (so as to avoid the mooching) yet making themselves statistically more likely to need aid from the taxpaying neighbors throughout their lifetime, due to lower wages as they don't have a degree?

What do you see as the positives of this approach?

[Crimson Wife]

You are saying you want them to be dependent on financial aid rather than dependent on their parents?

 

Dependent on taxpayer money/university donor money?

 

How is this less dependent?

 

Yes, I do think it's better for young adults to be independent of their parents, even if that means they qualify for taxpayer-funded financial aid. DH attended college on Uncle Sam's dime rather than his parents' and he's a better man for it. He was way more mature and self-reliant than most of his peers.

[maize]

Yes, I do think it's better for young adults to be independent of their parents, even if that means they qualify for taxpayer-funded financial aid. DH attended college on Uncle Sam's dime rather than his parents' and he's a better man for it. He was way more mature and self-reliant than most of his peers.

May I assume then that you are also in favor of higher taxes to support all of the college students?

[elegantlion]

Yes, I do think it's better for young adults to be independent of their parents, even if that means they qualify for taxpayer-funded financial aid. DH attended college on Uncle Sam's dime rather than his parents' and he's a better man for it. He was way more mature and self-reliant than most of his peers.

 

Have you read the recent thread on the boys to men continuum? Maturity and the ability to handle independence are almost separate issues and really have little to do with the magic age of 18 or whether or not the parents pay for college. 

 

I'm quoting 8 here "We have to parent the kids in front of us. They are individuals and some require different parenting than others." 

 

Between dependent and independent there is interdependent. Ds funds his own education, well him and the government, but he lives at home and pays part of the bills. We have an intergenerational household and an interdependent lifestyle. My mom benefits from the emotional support, I benefit from the physical support my mom provides, like caring for the home and pets while we're gone, and ds benefits by knowing he has a physically and emotionally stable home environment, something he lacked when I was married. I would wager ds will be a better man because he knows his family loves him and provides some support (physical and emotional) as he finishes his education. 

[creekland]

Yes, I do think it's better for young adults to be independent of their parents, even if that means they qualify for taxpayer-funded financial aid. DH attended college on Uncle Sam's dime rather than his parents' and he's a better man for it. He was way more mature and self-reliant than most of his peers.

 

My kids are way more mature and self-reliant than most of their peers too.  It has nothing to do with who pays for college or whether they live at home on breaks (or while attending).

 

It has nothing to do with heading into the military (or not) either.  Both hubby and I did.  None of our boys have.  They're still super mature and self-reliant. 

 

Many folks comment on that to us - even at their colleges.  As a parent it's pretty darn nice to have so many different folks (from the janitors to the folks serving in the dining halls to professors) pulling us aside to let us know.

 

I credit much of it to our kids having seen a fair bit of "life" from many dimensions.  There's no correlation at all to who pays for college or where they live.

[Haiku]

why should the IRS give a tax break for it?

 

Because it benefits a country as a whole to have a more educated populace, and therefore it is a legitimate concern of government to ensure that more citizens have access to higher education.

[OnMyOwn]

Just thought I'd throw in our anecdote. I read this article to dh last night. He found a "new tax calculator" (I think linked to MarketWatch, or something like that?) then compared that to last year's return. It appears on first glance that we will pay $6000 less with the new tax code, even with four children in the college age range (18-24).

I've read that 80% of Americans will get a significant tax break. And only 5% (should be mostly higher earners) will see an increase. My husband just received the first Christmas bonus he's had in 10 years.

[DawnM]

I've read that 80% of Americans will get a significant tax break. And only 5% (should be mostly higher earners) will see an increase. My husband just received the first Christmas bonus he's had in 10 years.

 

We are going to be paying several thousand more, according to my DH, an accountant, who has access to real calculators that calculate everything, not just the simple ones online that show we will save money.

 

I think we aren't getting the entire picture.  We are losing our personal exemption for one thing.

 

And we are not in the 1%, not by a long shot.

 

And ha, my husband just got the smallest bonus he has ever had.

[StephanieZ]

FWIW, I also think that the financial aid system needs to make it easier for students aged 18-23 to get "independent" status. I believe in treating young adults as adults and not adolescents.

 

I don't mean this to be rude  . . .

 

. . . but I really suggest you book mark this thread or copy/save your posts and revisit them when you have college age "kids".

 

Just wait. It's so fun . . . and expensive . . . and complicated . . . to raise young adults. 

[DawnM]

Just thought I'd throw in our anecdote. I read this article to dh last night. He found a "new tax calculator" (I think linked to MarketWatch, or something like that?) then compared that to last year's return. It appears on first glance that we will pay $6000 less with the new tax code, even with four children in the college age range (18-24).

 

That calculator shows us paying almost $2,000 less, but there are many variables that aren't in there.  DH works for one of the Big 4 accounting firms and has a more detailed calculator, it shows we will be paying more.

 

YMMV

[DawnM]

I don't mean this to be rude  . . .

 

. . . but I really suggest you book mark this thread or copy/save your posts and revisit them when you have college age "kids".

 

Just wait. It's so fun . . . and expensive . . . and complicated . . . to raise young adults. 

 

I don't even want to look at what I said back before my kids were at the ages they are now.  Quite sure I said I would never pay for them to get an Art degree or pay for them to live away from home, or pay for private college.  I was also adamant that if they did any of the above, we would require them to pay the difference (between local 4 year tuition and living at home and whatever their chosen college would be!)

 

Today I am shopping for my kid to go AWAY to college, at a PRIVATE college, to get an ART degree!  

 

:lol:  :lol:  :lol:  :lol:

[creekland]

That calculator shows us paying almost $2,000 less, but there are many variables that aren't in there.  DH works for one of the Big 4 accounting firms and has a more detailed calculator, it shows we will be paying more.

 

YMMV

 

That's a little scary.  The online quickie has us paying around the same +/- a couple of hundred since hubby's income is not the same year in and year out due to self employment.  It shouldn't matter for this year since it doesn't change for April's taxes, but it has me wondering what's in store for the following year.  Since we pre-pay, it would be helpful to have a decent idea.  I guess they'll come out with better online calculators or he uses Tax Act for the real "end of year" filing, so maybe he can run though something before the first ones are due.

 

I don't even want to look at what I said back before my kids were at the ages they are now.  Quite sure I said I would never pay for them to get an Art degree or pay for them to live away from home, or pay for private college.  I was also adamant that if they did any of the above, we would require them to pay the difference (between local 4 year tuition and living at home and whatever their chosen college would be!)

 

Today I am shopping for my kid to go AWAY to college, at a PRIVATE college, to get an ART degree!  

 

:lol:  :lol:  :lol:  :lol:

 

We brought our kids up saying we'd pay half.  It sure seemed reasonable, until I saw how much their half would be...  Now we just let them take on the basic loans and we cover the rest thankful that they all earned scholarships + the colleges they chose were within our budget after need-based aid.  It's hit our retirement and travel budgets, but we decided we were ok with that.  I'm looking forward to the "pay raise" we get next year... only one semester left to pay for - and it's due Jan 2nd - so almost done!

[DawnM]

That's a little scary.  The online quickie has us paying around the same +/- a couple of hundred since hubby's income is not the same year in and year out due to self employment.  It shouldn't matter for this year since it doesn't change for April's taxes, but it has me wondering what's in store for the following year.  Since we pre-pay, it would be helpful to have a decent idea.  I guess they'll come out with better online calculators or he uses Tax Act for the real "end of year" filing, so maybe he can run though something before the first ones are due.

 

 

We brought our kids up saying we'd pay half.  It sure seemed reasonable, until I saw how much their half would be...  Now we just let them take on the basic loans and we cover the rest thankful that they all earned scholarships + the colleges they chose were within our budget after need-based aid.  It's hit our retirement and travel budgets, but we decided we were ok with that.  I'm looking forward to the "pay raise" we get next year... only one semester left to pay for - and it's due Jan 2nd - so almost done!

 

Thankfully not affecting retirement, and we are paying for it by me going back to work.  Maybe I should just have my check direct deposited to the school!  :lol:

 

And next year we have 2 in college.  Second says he wants CC but he has been accepted to 4 year schools.  DH is telling me to STOP pushing it, if he is happy starting at a $2,500/year tuition school, let him! 

 

:gnorsi:

[Wheres Toto]

I don't believe people should get exemptions or credits for their children unless those children are minors or disabled. Once an able-bodied individual turns 18, then he/she is an adult and the parents no longer have any legal obligation to support them.

 

If parents want to help out an adult son or daughter by assisting with college or allowing him/her to continue living at home, then that's the parents' prerogative (we plan to continue helping out with college assuming decent academic performance) but why should the IRS give a tax break for it?

 

Why should the taxpayers pay for it?  Why should the government offer low-interest loans and grants?  Why don't we just make each kid figure it out for themselves with no help from anyone?   That'll sure teach 'em.

[Haiku]

We are comfortable but not wealthy. According to the Marketwatch tax calculator referenced in this thread, our taxes will go up because of the GOP tax plan.

 

I have used three tax calculators now, and all three of them have said our taxes will go up.

 

Yay.

[JanetC]

Why should the taxpayers pay for it? Why should the government offer low-interest loans and grants? Why don't we just make each kid figure it out for themselves with no help from anyone? That'll sure teach 'em.

I mean, that's basically where the country is heading. Lower tax revenues mean lower services for everyone.

[OnMyOwn]

We are going to be paying several thousand more, according to my DH, an accountant, who has access to real calculators that calculate everything, not just the simple ones online that show we will save money.

 

I think we aren't getting the entire picture. We are losing our personal exemption for one thing.

 

And we are not in the 1%, not by a long shot.

 

And ha, my husband just got the smallest bonus he has ever had.

Sorry to hear that, Dawn.

[DawnM]

Sorry to hear that, Dawn.

 

Well, it is what it is.  But I think those calculators are misleading and I think many are going to be surprised when it doesn't play out like the online simple calculators say they will.

[elegantlion]

I'm curious if one of the long-term fallouts will be the loss of child support for college students. Right now, technically, ex owes me child support until ds is 24, I think, as long as he in college. 

[Frances]

I've read that 80% of Americans will get a significant tax break. And only 5% (should be mostly higher earners) will see an increase. My husband just received the first Christmas bonus he's had in 10 years.

This is an oversimplification of a very complex bill with numerous interacting factors and results that change pretty dramatically over time, especially for those with lower incomes. In dollar terms, the majority of savings go to the wealthy and corporations, and very quickly many of those with lower incomes will pay more. The Joint Committe on Taxation produced the distribution tables (effects by income level) for the bill and to really get an idea of who is getting tax breaks and when, it's important to look at the results for many years, not just the first.

 

Congrats on the Christmas bonus!

 

For those interested, the Tax Policy Center has the most complete calculator I've seen. But it's important to keep in mind that the results are only for the first year of the bill.

[OnMyOwn]

This is an oversimplification of a very complex bill with numerous interacting factors and results that change pretty dramatically over time, especially for those with lower incomes. In dollar terms, the majority of savings go to the wealthy and corporations, and very quickly many of those with lower incomes will pay more. The Joint Committe on Taxation produced the distribution tables (effects by income level) for the bill and to really get an idea of who is getting tax breaks and when, it's important to look at the results for many years, not just the first.

 

Congrats on the Christmas bonus!

 

For those interested, the Tax Policy Center has the most complete calculator I've seen. But it's important to keep in mind that the results are only for the first year of the bill.

Well, yes, I'm thinking any all discussions of the bills on these boards are gross oversimplifications. Of course the wealthy and large corporations will see the biggest cuts. If I pay $15,000 a year in taxes, it would be a bit ridiculous to give me a million dollar tax break, but if I pay $50 million in taxes, then a million dollar tax break might make sense.

 

I'm not sure where you are getting that it is only for one year? The middle class tax cuts will be in effect until 2027 -- 10 years. At that point, they will most likely be preserved unless whatever party who is power refuses to extend them. Which would be very unpopular, don't you think?

 

The Tax Policy Center says that 80% of Americans will see an average tax cut of $2,140 and that only 4.8% will see an increase.

 

This bill is very unpopular with the democratic party and, as we've seen especially over the last couple of years, most of the major news outlets are grossly biased in that party's favor. That is why there is all the doom and gloom about a bill that is going to actually make many people happy once they realize what the effects are for them. Sad, but true.

 

Now, as far as increases to the deficit, that is an issue I am concerned about, but it doesn't seem either party has the will to do anything about that. I would happily give up any tax cut if a serious attempt would be made to reduce the deficit, including the bonus my dh received as a direct result of this bill, but that isn't even up for discussion by either side.

[OnMyOwn]

Well, it is what it is. But I think those calculators are misleading and I think many are going to be surprised when it doesn't play out like the online simple calculators say they will.

I actually think it is going to go the other way and that many are going to be surprisingly pleased after all the hysteria that's been in the media. I hope you are, too.

[creekland]

Well, yes, I'm thinking any all discussions of the bills on these boards are gross oversimplifications. Of course the wealthy and large corporations will see the biggest cuts. If I pay $15,000 a year in taxes, it would be a bit ridiculous to give me a million dollar tax break, but if I pay $50 million in taxes, then a million dollar tax break might make sense.

 

I'm not sure where you are getting that it is only for one year? The middle class tax cuts will be in effect until 2027 -- 10 years. At that point, they will most likely be preserved unless whatever party who is power refuses to extend them. Which would be very unpopular, don't you think?

 

The Tax Policy Center says that 80% of Americans will see an average tax cut of $2,140 and that only 4.8% will see an increase.

 

This bill is very unpopular with the democratic party and, as we've seen especially over the last couple of years, most of the major news outlets are grossly biased in that party's favor. That is why there is all the doom and gloom about a bill that is going to actually make many people happy once they realize what the effects are for them. Sad, but true.

 

Now, as far as increases to the deficit, that is an issue I am concerned about, but it doesn't seem either party has the will to do anything about that. I would happily give up any tax cut if a serious attempt would be made to reduce the deficit, including the bonus my dh received as a direct result of this bill, but that isn't even up for discussion by either side.

 

I'm seeing a totally different reaction even in deep red territory where I live.  Plenty of folks on both sides of the aisle don't like the bill because of the debt/deficit.  They want to see that dealt with instead.  They are NOT pleased the wealthy are getting more.  That irks them a ton.

 

Yes, there are some who just want to see the cash in their pockets and don't care about anything else or who even think the wealthy somehow deserve more, but they're fewer in number than I thought they would be.

 

That's actually one thing that gives me hope about it all.  (That many of my fellow Americans can see the bigger picture regardless of how we think about other things.)

[OnMyOwn]

I'm seeing a totally different reaction even in deep red territory where I live. Plenty of folks on both sides of the aisle don't like the bill because of the debt/deficit. They want to see that dealt with instead. They are NOT pleased the wealthy are getting more. That irks them a ton.

 

Yes, there are some who just want to see the cash in their pockets and don't care about anything else or who even think the wealthy somehow deserve more, but they're fewer in number than I thought they would be.

 

That's actually one thing that gives me hope about it all. (That many of my fellow Americans can see the bigger picture regardless of how we think about other things.)

Well, my sister, who is a teacher and a single mom, will be very grateful if she sees an additional $2,000 each year as the result of this bill. It will make a significant difference for her.

 

As far as the deficit, as I already said, we agree there. Though it doesn't seem as though there is too much concern in general as it increased almost $8 trillion dollars over the last Presidency without any tax cuts.

[Dmmetler]

I don't believe people should get exemptions or credits for their children unless those children are minors or disabled. Once an able-bodied individual turns 18, then he/she is an adult and the parents no longer have any legal obligation to support them.

 

If parents want to help out an adult son or daughter by assisting with college or allowing him/her to continue living at home, then that's the parents' prerogative (we plan to continue helping out with college assuming decent academic performance) but why should the IRS give a tax break for it?

Except that the FAFSA numbers assume that the parent will help, no “want†about it. If my adult child’s financial aid is based on my ability to pay, not on that child’s income, the least they can do is recognize that the kid isn’t truly independent yet!

[Dmmetler]

Also, I see a difference between increasing the deficit to pull out of a recession and avoid a depression and increasing the deficit so that politicians can pat themselves on the back for keeping a promise (and convienently, set the bonuses to expire just when they no longer have to take responsibility).

 

Honestly, The whole tax plan reminds me of a kid bringing a bag of cookies to share at lunch in the hopes of being popular, not considering that mom has to go to the trouble of baking said cookies.

[Granny_Weatherwax]

Well, I for one am quite concerned how this will all play out. I know it's anecdotal but being able to claim DD and DGD for these past few years has been the only financial benefit we have received. What did having DD and DGD live with us do? It kept DD from applying for and receiving government housing, government medical card, food stamps, and government sponsored utility assistance while she attended college. Her school does not offer married or family housing so the money would have had to come from somewhere. Having them live with us allowed DD to graduate in 4.5 years with only the minimum of student loans (DH and I cash flowed everything else for her), gave both DD and DGD access to our health/dental/vision insurance. It gave DGD a stable home life with people who know her and love her and were able to be here when she was ill. DD was able to rest easily knowing she had a roof over her head, food on the table, and clothes on her back and that her daughter was provided for. In the 6 + years (+ 9 months of pregnancy), since DD became pregnant, and technically independent, she has used less than $1000 of government money even though she qualified for much more. We believed that since we were able to support her it was our obligation to do so. There was no reason to rely on government assistance when there might be others out there who would/could use the benefits.  The government (local, state, and federal) all took their share from her paychecks so she was paying in.

 

Our claiming DD and receiving what small tax credit we could was a pittance when compared to the amount of money the government would have spent on her and DGD.

 

 

[StephanieZ]

Did y'all hear that HELOC (home equity line of credit) interest is no longer deductible?! So, if you itemize and have a HELOC, this is really important info (and you're screwed, big shocker). I shudder to think of the folks who took out big HELOCs thinking they were pretty much like a mortgage tax-wise . . . as they long have been . . . Now interest rates are up somewhat from their lows, so refinancing into a new regular mortgage might not work well. 

 

I'm pretty steamed. We'd used a pretty big HELOC to put money down on our college girl's house and for the "finishing touches" on our big home renovation a couple years ago . . . thinking there was no rush to pay it off as we'll sell that house before the 10 year HELOC is due (and besides, the rest of our regular mortgage would be nearly paid off by then) . . . and the rates were/are very low (like our regular mortgage), so I wasn't in any big rush to pay it off, thinking we could clear it when we sell the investment/college house and/or when we're done paying for college . . .

 

I've canceled my retirement contributions for 2018 and will be redirecting my savings towards paying off the HELOC until it's gone, which will take some years at this rate (but I might get a job to help speed it up). Maybe that's a silver lining . . . encouraging us to get rid of all debt . . . maybe not . . . I can't believe they didn't at least grandfather in existing HELOCs. 

 

I know plenty of folks use HELOCs to pay for their kids' college . . . 

 

Good grief. 

[Crimson Wife]

May I assume then that you are also in favor of higher taxes to support all of the college students?

 

I am in favor of a mandatory service obligation post high school (young adults could choose military or civilian service) like most countries have and at the end of it, money for college or vocational training. And yes, I think the benefits to society of such a plan would be worth paying higher taxes.

[Frances]

Well, yes, I'm thinking any all discussions of the bills on these boards are gross oversimplifications. Of course the wealthy and large corporations will see the biggest cuts. If I pay $15,000 a year in taxes, it would be a bit ridiculous to give me a million dollar tax break, but if I pay $50 million in taxes, then a million dollar tax break might make sense.

 

I'm not sure where you are getting that it is only for one year? The middle class tax cuts will be in effect until 2027 -- 10 years. At that point, they will most likely be preserved unless whatever party who is power refuses to extend them. Which would be very unpopular, don't you think?

 

The Tax Policy Center says that 80% of Americans will see an average tax cut of $2,140 and that only 4.8% will see an increase.

 

This bill is very unpopular with the democratic party and, as we've seen especially over the last couple of years, most of the major news outlets are grossly biased in that party's favor. That is why there is all the doom and gloom about a bill that is going to actually make many people happy once they realize what the effects are for them. Sad, but true.

 

Now, as far as increases to the deficit, that is an issue I am concerned about, but it doesn't seem either party has the will to do anything about that. I would happily give up any tax cut if a serious attempt would be made to reduce the deficit, including the bonus my dh received as a direct result of this bill, but that isn't even up for discussion by either side.

One of the main personal provisions of the bill, using chained CPI to index the parameters, does not expire. That, along with the removal of the affordable care mandate, causes the picture of winners and losers to change pretty dramatically over the next 10 years. You can see the official distribution tables by year at the Joint Tax Committee website. Many people that start out getting small tax breaks end up owing more than they would under current law, especially at the lower end. And these are the very same people most likely to be hurt by the reduction in programs due to the now increased deficit.

 

And at least for me, the fact that the wealthy are receiving the largest savings on in the personal side is an issue. It was advertised as a middle class tax cut and nowhere near the bulk of the savings go to the middle class. They absolutely could have structured it so at to not give breaks, especially big breaks, to the wealthy, as was promised early on by the administration.

 

I agree that it's unlikely that they will allow all of the personal provisions to expire in ten years, thus making the deficit even worse. The expiration date for most of the personal provisions was only put in place to make the total revenue loss from the bill fall under the $1.5 trillion mark to allow for a simple majority to pass it.

 

And just a personal pet peeve of mine about the bill is that it pretty much breaks all tenants of sound tax policy. Most of the base broadeners didn't make it into the final bill and many potential substantial ones were never discussed. The choosing of winners and losers within the pass through income piece seems to defy any overarching policy. And the bill has created some huge incentives for gaming the system (and we generally know who can afford to do that) by creating such large disparities, for example, between the way wage and business income are taxed. There's an interesting paper out there by several law school professors called "The Games They Will Play" that discusses this.

Edited December 23, 2017 by Frances

[MarkT]

And just a personal pet peeve of mine about the bill is that it pretty much breaks all tenants of sound tax policy. Most of the base broadeners didn't make it into the final bill and many potential substantial ones were never discussed. The choosing of winners and losers within the pass through income piece seems to defy any overarching policy. And the bill has created some huge incentives for gaming the system (and we generally know who can afford to do that) by creating such large disparities, for example, between the way wage and business income are taxed. There's an interesting paper out there by several law school professors called "The Games They Will Play" that discusses this.

Do you have a link?

 

TIA

[Frances]

Do you have a link?

 

TIA

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084187

[DawnM]

edited by moderator to remove deleted quote

It’s not only one party that’s upset. There’s already been speeches about what’s going to be used to offset this loss of money, the social safety net. Give them a bit of time, and you’ll see plenty of white, rural voters pissed off at their decreased amounts for food stamps, Medicaid, heating assistance, and Social Security.

There’s a definite disconnect here. Yes, I can be happy because I may see a $2000 decrease in taxes, but I can still be intelligent enough to know exactly who’s getting screwed in the deal, and who is doing the screwing.

 

And it won't just be the poor seeing the folly of this bill, it will be all of the things our tax dollars pay for...roads, police, military, and oh yeah, my job as a PS employee (and I am not just talking about my salary, I am talking about larger class sizes, building repair, elective classes, all sorts of government funded things.....

[creekland]

quote deleted by moderator

 

 

With the top line, I think you've missed a few threads over the past years if you think most folks (both sides of the aisle) are only upset with the deficit now.  Many of those threads end up deleted due to politics getting into them - or bashing - or whatever causes it, but I can't think of anyone who is only upset about it now.  What's happening now is it's taking another major step in the wrong direction - for no solid reason (the economy is strong at the moment) - and mostly giving the benefits to the upper crust.

 

How is it mostly going to the upper crust?  If there's a tax cut, it would be nice if it were a fair tax cut, not a weekend holiday to the masses while the wealthy (esp those above 500K) get a car.

 

I'm saving time quoting from Poppy (Post 358) in this thread:

 

http://forums.welltrainedmind.com/topic/664946-effect-of-tax-reform-on-large-families/page-8?do=findComment&comment=7929701

 

If you make $50,000/year you will save around  $870 annually.

If you make $100,000/year you will save $2250.

If you make $250,000/year you will save $6,500

If you make $500,000/year you will save $21,000

And it goes up from there.

If it were proportional, the person making $500,000 would be saving $8700, not more than double that.