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Spin Zone / Trump tax cut, no personal exemption
« on: February 07, 2019, 08:43:35 AM »
So I have to do my mom's taxes and turns out she didn't get a cut, she has to pay a little more. It's because she has a lot of itemized deductions so gets no advantage from the higher standard deduction, but they eliminated the personal exemption, which in the past would be tacked onto the itemized deductions. Even though her marginal rate went down, because her taxable income went up by about the amount of the old exemption, it worked out she'll pay a bit more.
To illustrate the numbers, her itemized deductions are $15,000 and in 2017 you add the personal exemption of about $4000 or whatever, so that was a total $19,000 reduction to her taxable income. But in 2018 she still has the same $15,000 itemized deductions, but no exemption, so only gets a $15,000 reduction in taxable income.
The standard deduction being raised from $6000 to $12,000 doesn't help her at all. The new tax law was sold by saying, well the $4000 exemption goes away but you get it back with the higher standard deduction.
So help me think this through. Is it unfair that people who have high itemized deductions now don't get quite the break? Or is it "more fair" that they pay more because they were actually getting breaks all along that the rest of us weren't?
This calls into question why we get deductions anyway. What's the theory? You get to pay less taxes because you spend money on certain things like medical care, employee expenses, local taxes, mortgage interest? So what? I should get to deduct what I spend on FOOD for godssakes. Maybe all itemized deductions need to go away.
I read somewhere that the exemptions are only eliminated through 2025. Does that imply they might come back? I don't know how this sausage is made.
To illustrate the numbers, her itemized deductions are $15,000 and in 2017 you add the personal exemption of about $4000 or whatever, so that was a total $19,000 reduction to her taxable income. But in 2018 she still has the same $15,000 itemized deductions, but no exemption, so only gets a $15,000 reduction in taxable income.
The standard deduction being raised from $6000 to $12,000 doesn't help her at all. The new tax law was sold by saying, well the $4000 exemption goes away but you get it back with the higher standard deduction.
So help me think this through. Is it unfair that people who have high itemized deductions now don't get quite the break? Or is it "more fair" that they pay more because they were actually getting breaks all along that the rest of us weren't?
This calls into question why we get deductions anyway. What's the theory? You get to pay less taxes because you spend money on certain things like medical care, employee expenses, local taxes, mortgage interest? So what? I should get to deduct what I spend on FOOD for godssakes. Maybe all itemized deductions need to go away.
I read somewhere that the exemptions are only eliminated through 2025. Does that imply they might come back? I don't know how this sausage is made.