Tax Reform Under Trump 2017


#2293

Your “standard deduction” doubled (and this is how they confused the public).

You used to have standard deduction (which is what you deduct IF you do not itemize your deductions) AND a personal exemption.

The personal exemption of over 4k per person, this effectively lowered the total of your “taxable income” by exempting some of it off the top.

Without that exemption, the amount of your paycheck that is now eligible to be taxed is higher by over 4k per person. So if last year, a family of 2 had 90k in taxable income, ie not exempt, than this year all other things remaining the same, you have a taxable income of 98k.


#2294

Sorry, bad use of terminology on my part. I should have said “deduction” rather than “exemption.”

So yeah, we are on the same page. I asked the question originally because with our move to NY, and my wife being out of work for several months, after the larger deductions I think our household income is going to drop below $77k, so we will be entirely in the 22% range. Of course, I’m going to have to file freaking state taxes in both Massachusetts and in New York. Not looking forward to that at ALL.


#2295

It’s actually not that hard, you file State Taxes for MA, and then add one little form to your NY return that says “I paid this much to MA” and that’s that. So that parts in your favor at least (my wife works in CT)


#2296

One of the big issues is people are very imprecise in their use of terms when talking about money. People routinely say some making over $250K is rich and somebody making under 40K is poor, when in fact wealth and income are only moderately correlated.

I knew a lot of couples in the Bay Area making well over $250K who managed to spend every dime and consequently never accumulated any wealth. I also know a couple of teacher from Las Vegas who never made more than 40K that accumulated a couple of million in real estates and stocks retired in their mid 30s, and single guy who never made over $50K living in the Bay Area who accumulated well over $1 million by his early 50s and retired.

A high income is very helpful for accumulating wealth, but it is neither a necessary nor sufficient requirement to do so.


#2297

These people hit some kind of jackpot. You’re talking about a 10-15 yr career at $40k, which is max $600k if they never spent a dime of their income. If they were worth millions by 35, they rode a real estate boom or put all their money on 27 red at the Mandalay Bay and got lucky. This is not a strategy all people making $40k can follow.

The thing about a couple making $250k and spending every penny is that they can stop spending every penny. As long as they have the ability to earn that income, they can accumulate wealth. That’s not true of a couple making $40k. $250k per year is not poor; those people aren’t poor even if they don’t have a dime in savings.


#2298

There’s gotta be a large amount of luck associated with this. Even if they managed to save $40,000 per year of their $80,000 combined salaries, after 15 years when they hit their mid-30s, that’s still only $600,000. To turn that into a couple of million is a really great ROI. I sense there’s something missing from this story.


#2299

Yes. If they invested every penny and got a 10% return for ten years, they’d have about a million bucks.


#2300

I never said they were poor. That came out of… nowhere.

There are certain debts that can really drag this down. But this board is pretty skewed in age. I don’t think anyone here has run into someone with 100k in student debt. I think that’s pretty damn high too but it’s not as uncommon as you might think.


#2301

Waves hand!

Hi, that would be two of my siblings. And a fate I only narrowly avoided.


#2302

I went to a state school. I avoided that too but dear god, there are a lot out there, people turning down what others think are lucrative jobs because it wouldn’t even pay for the debt.


#2303

You said: There are areas in this country where 250k might barely make you middle class.

If they’re not rich, and they’re not middle class, what are they?

I’m not trying to put words in your mouth, I just don’t know what else to make of that statement. Could be my bad.


#2304


#2305

My sister went to a state school (out of state though), but screwed up pretty badly in some places.

She’s recovered now, has a decent job with prospects. But she almost didn’t graduate, and would have had $150k in debt with no degree.

In fact it was almost that way for both academic and financial reasons. She had to go longer because of mistakes, but almost was unable to go because she couldn’t get financing for the last semester or two.


#2306

It makes you what I actually said, towards the rear of the of the middle class. I never said poor.

True. I wound up with more debt than I should have had I done it “right,” but it would be considerably worse if private schools were involved.


#2307

Rutgers is about 25,000 a year when I went to grad school.

Which I did because I didn’t have any jobs lined up in 2008 after trying for a year to find work after graduating.


#2308

‘Might’ also implies ‘might not’. What are the might nots?


#2309

The rest of the story is they bought their 450’ Condo in 2007 in Vegas just as the market was crashing and watched it go under water. But they lived well below their means saving more than half their income. They started buying real estate in Vegas, and taking out loans. When the Vegas market started getting expensive after 2012, he switched to buying property in Detroit suburbs. They’ve had a wonderful life since retiring spending the last two years, in Amsterdam, Instanbul, Angor Watt, Thailand, Australia and New Zealand before settling down in Seattle with their second kid. This is the best write up on their story.

Now this is admittedly uncommon, but not lotto winning rare, roughly 2% of the population retires before age 40 and 6% by 50. On the Early-retirement forum roughly 75% of the folks had professional jobs making well over 100K, but a good 20-25% didn’t. On the Mr. Money Mustache forum there are a lot of Gen X and Millenials accumulating significant wealth despite making only median income wages.


#2310

You can hit this pinata all night long, for the rest of the year for all I care hoping shit’s going to come out, but I never said poor.


#2311

Yup, Poor <> barely middle class.


#2312

I’m asking you what you meant by saying There are areas in this country where 250k might barely make you middle class. In particular what you meant by might.

If you don’t want to explain, that’s fine.