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    • Chris

      I'm no tax expert, but this new law goes into effect in 12 days and it feels pretty profound. What does the Law of Unintended Consequences have in store for us?

      One thing, it seems to me, is now that the corporate tax rate is so much lower than the individual one, there are gonna be a whole lot of new corporations created by independent contractors to take advantage of the new rates.

      The New York Times seems to agree.

    • Roadrunner

      I think most private citizens will see lower taxes, overall...but it is obviously temporary for most of us, and in my opinion is a panacea to mollify voters for the short term, especially for mid-term elections. With lower taxes for individuals and corporations, it will obviously increase national debt - and that problem is again being put on the back burner. The decision to do this appears to be to secure votes for the party that is in the Congressional majority. People unfortunately seem to have short memories these days. It certainly doesn't give the public time to adjust their taxes from this year to next. Without much time to study it before it is being put in effect, it is difficult to know the exact changes.

      Most of us know state property taxes are no longer deductible - which is a big hit to those whose states have high tax rates. On the other hand, it sounds like deductions for children are higher.

      On its'face, more corporations and therefore more competition would certainly seem to be a benefit.I hope it plays out that way..

      I will come back here again for more information and once we've figured out more. Thanks for opening up the topic.

    • Chris

      Our preliminary estimates are that it raises our taxes, because we own property in California and Hawaii.

      It looks like a lot of professional consultants are going to want to become corporations now to take advantage of the fact that corporate income tax is now lower than individual taxes.

    • gorudy

      I believe you will be 100% correct on this. I generally always felt it could be better for most employees to operate as independent contractors so they could deduct expenses like their 15% "home office", travel, cell phones, etc. potentially lowering taxable income significantly.

      In addition with the S Corp / C Corp election allowing the up to $54K (2018) SEP contribution + now the 20% QBI / Pass through entity deduction (with limits of course) it could be far more desirable to work for your own S Corp that provides the same services one individual might have provided as an employee.

      BTW - have guys read the calculations on this stuff? I thought Trump was "simplifying" the tax code. Seems as though we'll all be spending more on our accountants then before?

      One question this makes me think about is will the net tax receipts to the Federal Government end up being potentially much lower then they projected? Will State payroll taxes start taking a dramatic drop as more pass through entities are created?

    • kevin

      Most of us know state property taxes are no longer deductible - which is a big hit to those whose states have high tax rates. On the other hand, it sounds like deductions for children are higher.

      State income and property tax write offs are capped at a sum total of $10k. Still, it is fairly easy for the middle class to pay far beyond $10k in higher priced, democratic/coastal states.

      An immediate effect is many counties are recieving early property tax payments for 2018 before 2017 ends so homeowners can get one last year of higher write offs. Some counties even assessed properties for 2018-19 tax early so citizens could pay even farther out. Don’t know how the IRS will treat that.

    • kevin

      Home prices in higher priced markets, such as my neck of the woods, the SF Bay Area, will probably rise more slowly because interest write offs for loans will be capped at 750k. It will reduce affordability of most homes in the Bay Area for a prospective buyers needing to mortgage most of the home.

      I also wonder if housing inventory will shrink because keeping a grandfathered loan of 750k+ subject to fully deductible interest will make existing homeowners think twice about moving. Less inventory leads to higher prices but I think reduced affordability for buyers trumps that.

    • Chris

      A fascinating story just broke in the Los Angeles Times from professors of law at NYU: The GOP tax plan creates one of the largest new loopholes in decades.

      It's the 20% deduction for pass-through income. The thing is, you can't be an employee and claim it. To get the deduction, you could become an independent contractor, but then you'd have to forgo employee benefits like health insurance, so a really complicated calculation ensues to figure out which is better for you.

      It sounds like the big winners will be owners of large pass-through businesses like Trump owns, but it explicitly blocks some professions from taking it, like doctors, if they are above certain income thresholds.

      Feels really complicated for everyone who doesn't have access to sophisticated tax advice to figure out. 😬

    • gorudy

      I think that you can become an independent contractor and still have your health insurance paid for by the company either directly or through COBRA or they could just build the cost into the payment for services. it's a net win for the company as they save a lot on payroll taxes, in SF California at least.

    • Roadrunner

      Well, that figures. I was thinking about incorporating last year...this will likely be what pushes me to complete that move. Strange that the GOP are stating lower taxes for many people initially...especially if people figure this all out before mid-term elections. And you're right - without a tax expert it will be very complex. I'm happy that we have a good tax guy...if he doesn't keel over from being a chain smoker! :)

    • Chris

      Hmmm, this is an interesting take on what happens if you live in a blue state like California or New York where property taxes are higher and you have a larger family of, say, 3 kids.

      Unfortunately, I know a lot of Californians in this situation who are sweating now, including in my own family.

      I don't know if this is a deliberate attack on blue states like the story suggests, the ones who didn't vote for Trump, or it's just an unintended consequence. I lived for 10 years in Texas in the oil industry and now I'm in California in tech. I came here because I thought our industries represented the future, we're the 5th largest economy in the world, and between us and New York we contribute more to the federal budget than any states.

      And now we'll have drilling offshore to prop up a dying industry and hurt our environment and tourism, our budget is going to get whalloped by this tax change. Hmmm... Am I seeing this wrong?

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