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[quote=plm]Interest in loans should be an expense too, right? So I should get a loan on my rental and use that to pay off my mortgage on my house. This way I can write off the interest as a business expense as I will probably be taking the standard deduction next year. Also avoid the net investment 3.8% tax if I get a big enough loan to make rental just barely making money.

Is this legal?[/quote]

If your rental doesn’t have a mortgage, and you borrow against it, and use the money to pay off the mortgage on your principle residence, the answer is no. It’s not deductible interest.

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[quote=ucodegen]From recollection, AGI includes Capital Gains. That means it also depends upon how much in gains you get on what your bracket is.

Another question is whether you depreciated your condo because that depreciation gets recaptured on the sale. The depreciation effectively drops your cost basis on the condo so the recapture is taxed at capital gains rates.[/quote]

I have no idea what his question means, but if the condo was rented, depreciation is recaptured whether it was taken or not. Depreciation isn’t a choice.

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the 10K limit doesn’t apply to business (which rental property qualifies), only those that are itemized deductions on schedule A.

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If the timing is, as you suggest, I think it’s unlikely that it will only be Trump in trouble. Trump and Pence are gone, next in line is the new speaker of the house, which would be a democrat. Republicans know that’s no good. If there is any chance of an impeachment, it will be before the next congress takes office in early 2019 so they can salvage some power.

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Give the money directly to the school district or even school. That’s how AZ does it. The tax credit form requires that you specify the school or school district. In fact, you can even specify the program within the school to get the funds. I send $400 (almost) directly to my niece’s classroom. She gets to have aids in her 16 kid, all non-verbal, special ed classroom because of the money she raises. I get credit exactly (for me anyway, there are limitations) like an estimated tax payment on my AZ return and a charitable deduction on my federal return.

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If I was a state legislator, I wouldn’t frame it as screwing the fed. It’s benefitting the taxpayers of California without costing the state any revenue, or costing any currently funded organization. Taxpayers who are tax aware can save some money. Tax advisors score.

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I think you skipped a step in your explanation. The qualifying charitable organizations should be organizations that are already getting state funding. Like schools. Arizona has some that aren’t currently funded by the state (like private schools, whose funding I personally strongly oppose, and would hate to see California include them in qualifying organizations). But most of the organizations are things the state is either already funding or reasonably could fund. I do not know whether the state reduces funding based on the amount of direct contributions, but there are some credits that are limited in total dollar amount.

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[quote=flu]It would be nice if CA decides setup a “charitable donation” for the state coffer such that for every $1 donated to that charitable donation, you get a state tax credit of 90 cents against your state taxes. Doing that, would give the Federal government the middle finger as it kills two birds with one stone.

1. It gets around the $10k SALT limit…because instead of people itemizing the state tax deduction capped at $10k, they would itemize the “charitable donation”, which is currently not capped…..

2. Those of us paying AMT would have an extra bonus, because unlike state/property taxes that are AMT limited, charitable contributions are not limited under AMT…..So getting an $90 cents state tax credit for every $1 of charitable donation to the state, it would still probably work out better…..[/quote]

Great thinking there. Arizona has that, though it’s limited to about $4,800, among multiple credits. It’s dollar for dollar and some of them can even be paid up to the due date of the return. Unused credits, similar to over-payments of state taxes, can be carried over to future years.

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[quote=henrysd]Isn’t property tax a special case of local tax?
It seems to the whole SEC. 11042 “LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.” doesn’t even mention property tax. It did mention foreign real prop tax, but not related to local property tax.

Our San Diego prop tax bill is 2017 July 1st to 2018 June 30 calendar, so the 2nd installment may still be considered as 2017 tax.[/quote]

The proposed law specifically refers to IRC §164 which includes state and local property taxes.

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[quote=henrysd]Thus, under the provision, an individual may not claim an itemized deduction in 2017 on a pre-payment of income tax for a future taxable year in
order to avoid the dollar limitation applicable for taxable years beginning after 2017.[/quote]

That’s income tax, not property tax. Property tax will still be deductible if it’s due. For California property, that means the installment due on 4/10/18 can be paid and deducted in 2017. Other states are on different calendars and there is no prop tax due at 12/31.

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[quote=flu]
Most “tax reform” is almost always a scam, from both sides. It’s politician trying to redistribute wealth among the middle class, leaving the poor and extreme rich alone. It happens from both parties.[/quote]

In fairness, there hasn’t been tax reform since 1986, and that was very real. It was a transformative change in taxation in the US. The Dems have not even proposed anything I recall that they’ve called tax reform in the last 30 years except that which only applied to corporate taxes. Dems have never left the very rich alone. Both sides don’t do it. Tax rate changes aren’t tax reform.

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I’m not so convinced all these tax increases, as annoying as they are, are really devastating.

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I agree. Not devastating to any individuals, except in rare situations. Low income people can get hit with higher taxes. For those making $30K with 3 kids, losing $500 can be devastating. It could also be devastating to

The problem is not so much with itemized deduction changes. Outside sales people and W-2 truckers could get killed. I can think of a few others that will also.

A HUGE windfall for some wealthy and ALL uber-wealthy.

It could be devastating for what it portends, and what it holds for the economy down the line. It’s pretty similar to the tax cut from the late 20’s. Something bad happened after that.

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[quote=flu]
For rental properties, doesn’t mortgage, property tax, and just everything else count on as cost of running your rental? So none of that changes right?[/quote]

Yes, but. None of that changes, but it doesn’t mean the value of your properties are unchanged. If you own single family residences as rentals, they’ll sell based on what other single family residences are selling for, not based on ROI.

The value of multi-unit rentals may go up with this tax change. Lower taxes on passive income can increase ROI.

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[quote=scaredyclassic][quote=flu]Are things really going to be that bad, if you factor in the ridiculous equity markets gain?

Yes, it will suck if you live paycheck to paycheck, have no investments, have no financial plan to invest…But I doubt many of us piggs are worker bees alone. Many probably are heavily invested too.

Does paying an extra few grand in taxes matter more than dow rising 400 points in a few days?

Just curious.[/quote]

theoretically, this tax plan significantly lowers your property values. itemizing loses value, flus real estate empire lises value[/quote]

Lower top marginal rates reduces the government subsidy for mortgages for medium and high wage earners. Same thing with the loss of the deduction for state taxes (and possibly property taxes). I don’t know if it will be significant, but the effects on residential real estate values could be material in some price ranges.

The financial markets are pretty much in the same trajectory they’ve been in for more than 8 years now.

If you’re at risk of not itemizing with a larger standard deduction, move all deductions into this year that you can. Or if you’re in a top marginal bracket, do the following:

Pay your 2nd half taxes now.

Make your January mortgage payment before the end of the year. If you pay it online, get it in by 12/31 and it will be reflected properly on your year end statement.

Get rid of stuff to goodwill now. Next year’s church donations now.

Business dues, investment expenses, etc. if you have deductible employee business expenses now if they can be accelerated.

If it’s likely you’ll owe state taxes, make an estimated tax payment of what you will now and deduct this year. (Be VERY careful with this one if you get any ACA premium tax credit, a refund next year is counted as income.) But be careful of AMT.

If you pay your own insurance premiums and have deductible medical expenses, make sure you pay Jan premium this month.

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Neither house nor senate bill eliminates home mortgage deduction, though there are some limitations. Those limitations will probably end up only applying to new mortgages. State & local income and property taxes are limited and eliminated. Medical and miscellaneous are eliminated. Accelerating property taxes makes sense, particularly if the increased standard deduction will be more than your actual itemized. If that’s the case, accelerating any charitable contributions also makes sense.

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