Tweet
It's not quite time for the Republicans to take a victory lap, but they've certainly cleared the most difficult hurdle. Since the Senate was the harder obstacle, the final bill is far more likely to look like the Senate bill than the House bill.
A brief summary of the Senate bill passed early this morning:
Deductions:
Standard deduction will be doubled. Exemptions will be gone. State and local income taxes are no longer deductible. Property taxes up to $10K are deductible and mortgage interest on first $1M is still deductible.
This will result in far fewer people itemizing, including many high income professionals.
Brackets:
There are 7 brackets. Don't pay much attention to the %s or the brackets. Basically, every bracket is 2-5% less. So what was 15% is now 12%. What was 25% is now 22% etc. The 35% bracket goes all the way to $1M for marrieds, then the top bracket is 38.5%.
AMT:
Unfortunately, the Senate bill does not completely remove the AMT, but at least it will hit fewer of us.
Pass-Through Entities:
Basically, pass-through entities like The White Coat Investor, LLC and my physician partnership, will not have to pay taxes on business profits at 35% or 38.5%. That'll be somewhere just under 30%.
Two caveats, however.
# 1 If you make over $500K ($250K single), and are in a service business (i.e. a high income professional,) you don't get that break. You pay at 35-38.5%.
# 2 If you make over $500K ($250K single) the deduction is limited to 1/2 of what you take as wages. So if you make $1M, and pay yourself $300K in wages, you don't get that break on all $700K. You only get it on $150K. The rest is paid at 35%. You still would save the Medicare tax on that distribution.
Estate Tax
Exemption Doubled.
Overall, this will lower the tax bill for most doctors and simplify tax filing for many. Those in high income tax states won't see as much benefit as those in lower tax states as much of what they gain in the brackets they lose with the loss of the state income tax deduction. There are a few other interesting changes, but they'll have a minor effect on the lives of most high income professionals compared to what I note above.
ALL DISCUSSION ON THE FORUM OF THIS BILL NEEDS TO TAKE PLACE IN THIS THREAD. AD HOMINEM ATTACKS AGAINST OTHER FORUM MEMBERS, POLITICIANS, POLITICAL PARTIES ETC WILL NOT BE TOLERATED. FOCUS YOUR DISCUSSION ON WHAT THE BILL DOES AND DOES NOT DO, NOT HOW YOU FEEL ABOUT IT OR THE MOTIVES OF THE POLITICIANS WHO VOTED FOR OR AGAINST IT. IF PEOPLE CANNOT ABIDE BY THIS RULE, THE THREAD WILL BE LOCKED AND FURTHER DISCUSSION OF THE BILL WON'T BE ALLOWED UNTIL IT IS SIGNED INTO LAW.
A brief summary of the Senate bill passed early this morning:
Deductions:
Standard deduction will be doubled. Exemptions will be gone. State and local income taxes are no longer deductible. Property taxes up to $10K are deductible and mortgage interest on first $1M is still deductible.
This will result in far fewer people itemizing, including many high income professionals.
Brackets:
There are 7 brackets. Don't pay much attention to the %s or the brackets. Basically, every bracket is 2-5% less. So what was 15% is now 12%. What was 25% is now 22% etc. The 35% bracket goes all the way to $1M for marrieds, then the top bracket is 38.5%.
AMT:
Unfortunately, the Senate bill does not completely remove the AMT, but at least it will hit fewer of us.
Pass-Through Entities:
Basically, pass-through entities like The White Coat Investor, LLC and my physician partnership, will not have to pay taxes on business profits at 35% or 38.5%. That'll be somewhere just under 30%.
Two caveats, however.
# 1 If you make over $500K ($250K single), and are in a service business (i.e. a high income professional,) you don't get that break. You pay at 35-38.5%.
# 2 If you make over $500K ($250K single) the deduction is limited to 1/2 of what you take as wages. So if you make $1M, and pay yourself $300K in wages, you don't get that break on all $700K. You only get it on $150K. The rest is paid at 35%. You still would save the Medicare tax on that distribution.
Estate Tax
Exemption Doubled.
Overall, this will lower the tax bill for most doctors and simplify tax filing for many. Those in high income tax states won't see as much benefit as those in lower tax states as much of what they gain in the brackets they lose with the loss of the state income tax deduction. There are a few other interesting changes, but they'll have a minor effect on the lives of most high income professionals compared to what I note above.
ALL DISCUSSION ON THE FORUM OF THIS BILL NEEDS TO TAKE PLACE IN THIS THREAD. AD HOMINEM ATTACKS AGAINST OTHER FORUM MEMBERS, POLITICIANS, POLITICAL PARTIES ETC WILL NOT BE TOLERATED. FOCUS YOUR DISCUSSION ON WHAT THE BILL DOES AND DOES NOT DO, NOT HOW YOU FEEL ABOUT IT OR THE MOTIVES OF THE POLITICIANS WHO VOTED FOR OR AGAINST IT. IF PEOPLE CANNOT ABIDE BY THIS RULE, THE THREAD WILL BE LOCKED AND FURTHER DISCUSSION OF THE BILL WON'T BE ALLOWED UNTIL IT IS SIGNED INTO LAW.
but I just noticed one important provision that will affect many young physician families - the use of 529 funds are extended to K-12. This is a biggie because we’ve been limited to the $2k/year Coverdell ESA (Education Savings Account) contribution to fund private schools. If you begin contributing when your children are young, this will have a tremendous impact on your school savings.
Comment