Recalculate your 2016 Federal taxes using the current proposed 2018 rules- here

[Zaphod]

Vagabond MD wrote:

Baseballmom94 wrote:

Interesting info and plan to pull out our 2016 tax file and do the calculations with the proposed brackets – just for kicks since this tax plan may or may not pass.  As it stands now, it’s definitely not good for most docs.  Just wondering if anyone has done the calculations for the sweet spot or break even point to keep income within the 25 percent bracket with the standard deduction of 24,000 for a married couple. Is it simply to make 283,000 or is it more complicated than that?  Not sure if I’m making sense but, in other words, at what point does it make sense to work less rather that give an extra 10 percent away?

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Does it ever make sense?

I mean, if you earn an extra $100k and pay 35% to Federal Tax and hypothetical 5% to State, you still pocket $60k. The question is do you have use for the $60k?

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And does it materially impact your quality of life? If not, then it makes sense to earn more, almost always. However, if it is impacting your quality of life and increasing stress and decreasing happiness, it doesnt matter what the tax rate is, you need less of it.

[hightower]

Baseballmom94 wrote:

Interesting info and plan to pull out our 2016 tax file and do the calculations with the proposed brackets – just for kicks since this tax plan may or may not pass.  As it stands now, it’s definitely not good for most docs.  Just wondering if anyone has done the calculations for the sweet spot or break even point to keep income within the 25 percent bracket with the standard deduction of 24,000 for a married couple. Is it simply to make 283,000 or is it more complicated than that?  Not sure if I’m making sense but, in other words, at what point does it make sense to work less rather that give an extra 10 percent away?

Click to expand...

You'd still be bringing more money home if you made over 283k a year, but you'd be pocketing a smaller portion of it after taxes.  Only you can decide if that extra time spent working is worth it to you.  No one is going to say that it makes "more sense" to make less money per year for any sort of tax reason.  It's all about how valuable your time is.

[CM]

Zaphod wrote:

Vagabond MD wrote:

Baseballmom94 wrote:

Interesting info and plan to pull out our 2016 tax file and do the calculations with the proposed brackets – just for kicks since this tax plan may or may not pass.  As it stands now, it’s definitely not good for most docs.  Just wondering if anyone has done the calculations for the sweet spot or break even point to keep income within the 25 percent bracket with the standard deduction of 24,000 for a married couple. Is it simply to make 283,000 or is it more complicated than that?  Not sure if I’m making sense but, in other words, at what point does it make sense to work less rather that give an extra 10 percent away?

Click to expand…

Does it ever make sense?

I mean, if you earn an extra $100k and pay 35% to Federal Tax and hypothetical 5% to State, you still pocket $60k. The question is do you have use for the $60k?

Click to expand…

And does it materially impact your quality of life? If not, then it makes sense to earn more, almost always. However, if it is impacting your quality of life and increasing stress and decreasing happiness, it doesnt matter what the tax rate is, you need less of it.

Click to expand...

.

[G]

Zaphod wrote:

Vagabond MD wrote:

Baseballmom94 wrote:

Interesting info and plan to pull out our 2016 tax file and do the calculations with the proposed brackets – just for kicks since this tax plan may or may not pass.  As it stands now, it’s definitely not good for most docs.  Just wondering if anyone has done the calculations for the sweet spot or break even point to keep income within the 25 percent bracket with the standard deduction of 24,000 for a married couple. Is it simply to make 283,000 or is it more complicated than that?  Not sure if I’m making sense but, in other words, at what point does it make sense to work less rather that give an extra 10 percent away?

Click to expand…

Does it ever make sense?

I mean, if you earn an extra $100k and pay 35% to Federal Tax and hypothetical 5% to State, you still pocket $60k. The question is do you have use for the $60k?

Click to expand…

And does it materially impact your quality of life? If not, then it makes sense to earn more, almost always. However, if it is impacting your quality of life and increasing stress and decreasing happiness, it doesnt matter what the tax rate is, you need less of it.

Click to expand...

You've hit the issue on the head: 10-20 years ago, I was hungry and would work as much as possible, even though I understood the progressive taxation.  I doubled my salary as a senior resident by moonlighting!

Presently, if I work more, I still make more.  But now, not only am I comfortable, I have competing interests, specifically a little girl (who was crushed when I told her I work at 6am this Christmas).  I'm sure Prospect Theory could come up with a graph for this.  It's probably going to be three-dimensional:  ultimately, I don't "need" the extra money, so you're going to have to pay me marginally MORE to have less family/hobby time.

Ok, maybe it'll be four-dimensional, because when my kid is a teenager, I might pay money to not be at home....

[G]

CM wrote:

Zaphod wrote:

Vagabond MD wrote:

Baseballmom94 wrote:

Interesting info and plan to pull out our 2016 tax file and do the calculations with the proposed brackets – just for kicks since this tax plan may or may not pass.  As it stands now, it’s definitely not good for most docs.  Just wondering if anyone has done the calculations for the sweet spot or break even point to keep income within the 25 percent bracket with the standard deduction of 24,000 for a married couple. Is it simply to make 283,000 or is it more complicated than that?  Not sure if I’m making sense but, in other words, at what point does it make sense to work less rather that give an extra 10 percent away?

Click to expand…

Does it ever make sense?

I mean, if you earn an extra $100k and pay 35% to Federal Tax and hypothetical 5% to State, you still pocket $60k. The question is do you have use for the $60k?

Click to expand…

And does it materially impact your quality of life? If not, then it makes sense to earn more, almost always. However, if it is impacting your quality of life and increasing stress and decreasing happiness, it doesnt matter what the tax rate is, you need less of it.

Click to expand…

In my case I’d like to earn more (who wouldn’t?), and I have the opportunity, but my marginal tax rate is almost 50% (under current law) and I already work long hours. It isn’t worth it for me.

On the other hand, if lawmakers would decide that a taxpayer has paid his fair share after his total tax bill hits $150,000 or $200,000, so he should be allowed to keep any extra earnings, then I’d be motivated to go for it.

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Or a flat or consumption tax.

[docnews]

Mine goes up $200 even though I'm in a no income tax state. The removal of self employment health insurance premium deduction hurts and is unfair. I say remove it (I'm all for simplifying even at a cost to me) but then also remove the employer provided health insurance premium deductions.

This bill would really hike my marginal rate.

I like though that it truly simplifies the system.

[Zaphod]

docnews wrote:

Mine goes up $200 even though I’m in a no income tax state. The removal of self employment health insurance premium deduction hurts and is unfair. I say remove it (I’m all for simplifying even at a cost to me) but then also remove the employer provided health insurance premium deductions.

This bill would really hike my marginal rate.

I like though that it truly simplifies the system.

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It simplifies in some places but complicates it in others. And really it simplifies it in places that hardly matter like number of brackets. You'll now have two schedules (capital/dividends on old scheme) and a means testing for anyone trying to take the 25% business deduction. AMT/salt gone is simplified, but replaced with an up to 10k provision. I dont see a lot of simplification. Again, number of brackets isnt very complicated.

[docnews]

Zaphod, I agree the number of the brackets is not really important but the number of deductions reduced reduces the number of itemizers. A lot of obscure deductions that most filers would need an accountant to note were removed.

The business deduction is the big question mark but as written it doesn't seem to apply to those businesses that are really 1 person service industries which frankly few doctors knew how to set-up but many accountants/lawyers did.

[Zaphod]

docnews wrote:

Zaphod, I agree the number of the brackets is not really important but the number of deductions reduced reduces the number of itemizers. A lot of obscure deductions that most filers would need an accountant to note were removed.

The business deduction is the big question mark but as written it doesn’t seem to apply to those businesses that are really 1 person service industries which frankly few doctors knew how to set-up but many accountants/lawyers did.

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It would be great for the government to set a rational level of tax revenue, and simply apply it across the board. Honestly everything should just be pass through period, no corporate anything. Simplifies things and reflects reality.

You dont need to do anything to set those businesses up. The sole proprietor is the simplest classification there is.

[Re3iRtH]

I have a bunch of rentals that I file a Schedule E on as a sole proprietorship. Would I now need to go open LLC(s) in order to take advantage of the proposed 25% on gains rate?

[HikingDO]

Re3iRtH wrote:

Wow!!

I would have had $1,650 less taxable income and payed $2,444.25 less in taxes … that is yuuuge.

The reason the actual taxes paid savings is higher than the taxable income number is due to the stretching of the 25% bracket for single filers from $45,000 all the way to $200,000.

Although it pains me to say this, this proposed tax plan makes a stronger case for staying in the military as a physician. It is a guarantee that you will stay in the 25% marginal bracket or less, while having up to 40% of our income not taxed at all. Doesn’t even appear on these tax forms. Thoughts?

Trump is my new hero

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Shhhhhh.....quiet before MPMD or Hightower accuse you of being a racist!

Seriously though, we'd get back a little more than $1000 additionally with the new tax plan, so I'm a fan too.

[Zaphod]

Re3iRtH wrote:

I have a bunch of rentals that I file a Schedule E on as a sole proprietorship. Would I now need to go open LLC(s) in order to take advantage of the proposed 25% on gains rate?

Click to expand...

not as I understand it. Just the SP is fine.

[RDB]

I would pay $870 more. I am surprised that it was not more significant being in a high tax state.

[docnews]

So I have a sole proprietorship but this new pass thru tax would not apply to me. The few exceptions are where the tax manipulators will win out against a do-it-yourself doc.

1 person S corps currently abuse the tax code to reduce FICA taxes but it costs money to set-up unless you are a lawyer/accountant who does his own.

[TheGipper]

I’d be a lot more “OK” with GOP plan if the 35% bracket didn’t start so low. Kicks in at $260,000 for MFJ, while old system kicks in at $416,700. For someone who’s goal is to help the “middle class” whatever that means, a real head scratcher to punish this range of incomes only.

I also hope Orin Hatch brings back his “corporate tax integration” concept in which corporations could avoid double taxation by being able to deduct all or part of their dividends. This would also help a bunch of us docs that are incorporated as Professional Corporations realize the lower corporate rate of say 20% and pay out in deductible dividends, rather than all wages and quarterly bonuses to avoid double taxation. May also sell better to public and Dems. Ie compromise to lower corporate rate to only 25%, instead of 20%, but allow full deduction of shareholder dividends.