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

[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?

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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.

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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.

[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....

[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...

.

[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.

[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?

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.

[VagabondMD]

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?

[Baseballmom94]

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?

[Zaphod]

I dont think this works well in the way presented if you're self employed and have lots of deductions, its just going to be far more complicated. The differences in the stated method for the above first article shows 25k more income exposed to taxes under the new plan, but is almost exactly the same tax (<100$ difference). This seems a bit simplistic and likely not very useful as adding SALT, treatment of self employment, etc....all complicates things. This just looks like on the 1040 my AMT went away the nearly exact same amount as taxes decreased.

Really all self employed individuals are getting a nice tax increase this year as the amount taxed increased from 117 to 127k.

[VagabondMD]

CM wrote:

Peds wrote:

2K less……yuuuuuuuge as previously stated. and game changing…..

 

now where did i put that sarcasm button….

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Looks like I’ll come out about $4,500 ahead based on 2016 and maybe $5,000 ahead based on higher income in 2018.

Is that yuuuuge?

Well, we spent about $34,500 after tax on a new car last year and expect to hold it 10 years and sell for maybe $5,000, so the amortized cost will be about $3,000 per year. The amortized cost of our second car is about $1,500 per year. This tax savings is the replacement cost for both of our cars.

Looked at another way, we’ll spend about $65,000 this year. Assuming we don’t have ongoing $11,200/year basement repairs, we’ll spend less next year. The tax cut provides at least 7.7% of our annual expenditures.

It beats a poke in the eye with a sharp stick.

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Heck, my 6% saving could be two extra couples trips to Europe in 2018. Screw the basement!

 

[CM]

Peds wrote:

2K less……yuuuuuuuge as previously stated. and game changing…..

 

now where did i put that sarcasm button….

Click to expand...

.

[Re3iRtH]

You said game changing, not me.

$2500 is enough to cover an extra week long vacation overseas., now that flights abroad can be had for only $500-700. Thats yuuuge in my book.

Also that buys a lot of whiskey and bad decisions.

I think folks will find a way to bash Trump even when you get a free $2500 check hahaha, I love it!

[Peds]

2K less......yuuuuuuuge as previously stated. and game changing.....

 

now where did i put that sarcasm button....

[Zaphod]

This bill wont go through as stated of course, Senate is thinking of just plain introducing their own version right now even before a house vote.

[Re3iRtH]

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

[VagabondMD]

CM wrote:

Vagabond MD wrote:

1) Retrieve your 2016 tax return.

2) Using the methodology described here:

http://www.businessinsider.com/donald-trump-tax-plan-reform-change-take-home-pay-calculator-brackets-2017-11

3) And the brackets presented here:

https://www.fool.com/taxes/2017/11/03/how-could-your-2018-tax-bracket-change-under-the-g.aspx

Recalculate your 2016 taxes using the 2018 proposed law (and keep the political discussions on the other thread ).

I would have saved 6.0% on my Federal taxes applying my 2016 data to the 2018 proposed changes, as they currently stand.

 

Don’t forget that you can still deduct charitable contributions, mortgage interest, and personal property tax up to $10k.

 

Based on a lower 2017 income, and an expected even lower 2018 income, the savings will dissipate as I will not go as deep into the 35% tax bracket, where I gained ground to make up for the loss of the SALT deduction.

 

 

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A couple of notes:

Your first link indicates that the standard married couple deduction is $24,000, but the second link specifies that it will be $24,400 in 2018, and the second link is using 2018 tax brackets. So, when calculating 2018 taxes under the new proposal, use $24,400 standard deduction.

Also, if you use the second link to calculate proposed 2018 taxes on your 2016 income, you can’t compare that to what you actually paid in 2016. I believe the tax brackets under current law are different for 2018 vs 2016, so you’ll need to recalculate your 2016 federal tax based on 2018 brackets to compare apples to apples.

I’ll do a little better with the proposal, and will do a little better still in the future (because income rose a little).

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All fair points, but it should give you an idea.