20 Comments

  1. Joe

    Great write up, thanks Ed. Do you know if the flexible family credit would apply to college kids that are still dependents? I lost the child tax credit when they turned 17.

  2. Joe

    Wow, looks like the standard deduction has already gone up! From the Kitces’ link “(rising to $12,200 and $24,400, respectively, in 2018 when it would first take effect).

    • Yeah, I saw that too…sweet! However, I’m concerned that the Senate version of the bill could end the 457 account as we know it. No more penalty-free pre-59.5 withdrawals and good bye to contributing the max to both a 457 and a 403b. I’m going to let this play out before I crap an anvil. There seems to be a lot of misdirection in the air these days, so why freak out now?

      • Yeah, I’m keeping an eye on this part of the debate. Last thing I read was that they’ve dropped the 10% penalty on 457’s, but the still have the aggregated limit for 457/403b’s – so no more maxing out both as my teacher wife currently does. Hoping all of this will get dropped when (if?) they merge the bills, but not optimistic since this isn’t something most people even know about so they won’t miss it. We’ll see, there’s still a lot of time left. If that happens, there’d be a strong bias towards 457’s over 403b’s if fees are comparable.

        Even if they do keep the aggregate 403b/457 limit, I think it will be offset by the other changes – especially with the larger child tax credit and the much higher income phaseout. Combine that with increased dividends and (possibly) high stock valuations, and the $5K tax hit will likely be a wash. But one can always hope!

        • Mr. MSW, it’s hard to keep up with the news on this! It looks like I’ll have to revise this blog post at some point. I’m still worried about that 457 change. Fingers crossed, Ed

          • William

            Ed, please keep us updated on this. I take advantage of a 457/401k combo, and am dreading my taxable income increasing $18,500 in 2018….

          • William, I’ve been searching for info because that would dramatically change my hardcore savings method for sure. I’ll share the update info as soon as I find out something. Thanks for reading, Ed

  3. Great breakdown of FREE money. I’m waiting to see what is officially passed, and then I get to get my tax scheme together. Thanks for sharing some good ideas.

    • Thanks Josh. It’s always good to know your free money amounts. Just that little bit of planning can yield huge results come April 15th. Good luck finding your tax sweet spot.

  4. I’m waiting to see the final plan before running my numbers but it’s not going to be pretty. If you are in a high income tax state you lose that deduction. It seems like the Republicans figured out a way to hurt the blue States like NY, NJ and CA.

    • Hello Javi! So glad you liked it. There’s so much Free Money! out there, but you have to plan for it. Don’t worry, no matter tax plan goes through we’ll be ready to lock in our free money. I hope all is well in Texas. Mexico is still awesome. Ed

  5. Great post Ed! We love this series and always look forward to its update.

    We have shared with friends that the FI community has the ability to adjust to any tax change and your post bears this out. There are always wins for those who can read, learn, and adjust.

    • Thanks TRS, Well put. I love “read, learn, and adjust.” It sounds like a great website. You’re correct…if you hope to keep the taxman at bay, you’ll need to do 5-15 minutes of tax planning every year. Thanks for stopping by, Ed

  6. ***Rrraaarrgghhh****. Okay, Trump rage over. I agree with your analysis and think taxes will be marginally better for a low income earner. This is the trend every time there’s a tax plan.

    The one additional piece is investment gains might improve. The effective tax rate of the S&P 500 companies is 24% and the mid and small cap index companies pay a little more. That does equate to a small boost for shareholders. People sometimes forget that companies really don’t “pay” taxes, it’s just a reduction of the earnings per share that belong to every member of the FIRE community.

    • Wrinkles, (yuck, yuck) I’m with you…low income earners appear to get a nice bump under the Trump plan. I was pleasantly surprised to see that we might get a $7k increase in Free Money! I hope you’re right on that investment gain analysis. Thanks for visiting, Ed

  7. Those wrinkles! I’m a bit too academic on this stuff, which has some comedy in commenting on an educator’s site.

    The US collects just under 20% of GDP on average in taxes. If I can pay less than 20% (including taxes paid by the companies I own), I call that winning!

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