What tax cut?

I had my taxes done Monday, saw what I owed Uncle Sam and asked my accountant "where are the tax cuts?". He said I didn't make enough to see any real cuts, though the continued increase in maximum IRA contributions was at least something. Meanwhile, despite low inflation my apartment maintenance has gone up, necessary repairs cost more, and with my salary the same as last year I'm looking at a net decrease in income.

I also noticed that a particularly painful tax increase that inexplicably has gone unmentioned over the years by both Republicans and Democrats has not been addressed. Formerly you could deduct unreimbursed medical expenses if they exceeded 5% of your gross income. Then, very quietly it was raised to 7.5%, a 50% tax increase. Not a peep from Left or Right.

My friend Tom's sister who is a successful corporate lawyer made over $900,000 in 2003 and said that she felt that tax policy was "going in the right direction".

I shouldn't complain because all things considered I'm in relatively good shape, but I still want to know:

What tax cut?

Brightnorm

The most telling line, "Meanwhile, despite low inflation my apartment maintenance has gone up".

The big deduction is still in ownership...

True, but that's a given.

BN

Brightnorm:

The only solution to your problem is to marry your friend Tom's sister. /ubbthreads/images/graemlins/smile.gif

Now why didn't I think of that? /ubbthreads/images/graemlins/grin.gif

BN

I concur with the big man from Ohio.

Good point and it ties into another current thread, "What's the first thing you notice about a woman?" Face, chest, butt, height, noooo, it's the portfolio.

Some married people I work with said their tax guys said that check they got last summer (was it $400.00 or $800.00) was a tax return "loan" and that there are many people caught off guard this year and understandably perturbed. This was here say from 4 different people and I didn't confirm it.

Hey, I got an extra 1800 back, and I live a middle class lifestyle - of course, here in NYC, to do that, you earn enough that in the rest of the country (except parts of CA) you's be "upper middle class", so take that as you may - I know that $1800 really helped

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Icebreak said:
Some married people I work with said their tax guys said that check they got last summer (was it $400.00 or $800.00) was a tax return "loan" and that there are many people caught off guard this year and understandably perturbed. This was here say from 4 different people and I didn't confirm it.

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Anyone who was surprised this year wasn't paying attention last year. Same thing. The IRS chose to loan you some money and then asked for it back. If this situation is a surprise to your tax advisor you may want to find a new tax advisor.

-Fernando

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brightnorm said:
Formerly you could deduct unreimbursed medical expenses if they exceeded 5% of your gross income. Then, very quietly it was raised to 7.5%, a 50% tax increase.

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I'm picking a nit here, but that's not a 50% tax increase. It's a change in the deduction rules. The effect on your personal tax will vary depending on your situation. If your unreimbursed medical expenses were only 4% of your income, then there's no effect at all.

I don't know the specifics of this deduction. Can you deduct *all* expenses if they exceed the 7.5% threshold, or just the portion above 7.5%?

If it's just the portion above the threshold, and your expenses were 20% of your income, your deduction shrank from 15% to 12.5%. Hard to see that as a 50% tax increase.

In the worst case, if the entire amount is deductible if the amount exceeds the threshhold, and your expenses were 7.49%, your deduction decreased from 7.49% to 0.

I'm sure you could construct a case where this translates into a 50% increase in the amount of tax you pay in either situation, but I'm guessing the vast majority of cases will see much smaller increases.

That said, it is an effective tax increase, and that sucks.

Tyler,

Thanks for catching that, it makes me feel a little better but as you say, it still sucks.

Brightnorm

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KC2IXE said:
Hey, I got an extra 1800 back, and I live a middle class lifestyle - of course, here in NYC, to do that, you earn enough that in the rest of the country (except parts of CA) you's be "upper middle class", so take that as you may - I know that $1800 really helped

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Unfortunately, all this really means is that you gave Uncle Sam a zero-interest loan on that $1800. It was always your money, you just sent in too much to begin with. Doesn't matter what you make or your lifestyle, just how much you've decided to pre-pay out of you paycheck. You can easily work it so you get many thousands back at the end of the year... but at what cost to you?

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Darell said:
Unfortunately, all this really means is that you gave Uncle Sam a zero-interest loan on that $1800. ...snip...

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I USUALLY try for 0 back, 0 owed, but the last couple of years, my tax situation changed dramtically EVERY year. I got 1800 more back than I was expecting based on last years rules.

With the software the my accountant uses, he can tell you how much you would have paid under the previous years rules - like I said, the tax cuts netted me 1800 - I wasn't expecting it, and I ended up with some extra deductions starting this year - I've already adjusted my withholding.

When I say I try for 0 back, that's NOT strictly true - I try for a ballpark of 100-200 back, just to have the buffer on MY side