The state income tax problem nobody is talking about

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I85hokie
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The state income tax problem nobody is talking about

Post by I85hokie »

While everyone is caught up on the fact you won’t be able to deduct state income taxes for your federal income taxes (or capped at 10k at best), this is not that big of a deal, since the new higher standard deduction means millions more people won’t be itemizing now. What’s being overlooked is the actual amount of state income taxes that many pay will now be going up, unless state legislatures get busy right away. It boils down to one simple rule:

In most states, in order to itemize on your state return, you must also itemize on your federal return.

And in most states, the standard deduction is much, much lower than the federal one. In Virginia, the standard deduction is 6k for a married couple. In Georgia, it’s 3k. If you’re a taxpayer who normally takes the standard deduction, then it’s not a problem. But if you’re one of the millions of taxpayers who now falls in the sweet spot - itemized deductions less than the new federal standard deduction (24k for married) but more than the old one (I think 12.7K for married), your state taxes will definitely be going up. For instance, if you would have normally claimed 20k in itemized deductions for federal and Georgia purposes, now you will get the 24K standard for federal, but only 3k standard for Georgia. Since the top marginal rate in GA is 6%, kicking in at only 12k of income, that means your Georgia taxes will go up by $1,020 ((15k-3k) x 6%), which depending on your circumstances may more than wipe out any federal tax savings under the new law. In other states it could be worse.
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Hokie CPA
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Re: The state income tax problem nobody is talking about

Post by Hokie CPA »

I'm sure it will come up when the Virginia General Assembly reconvenes. Unlike the federal government, many state legislatures aren't in session all year. Ours only meets for about three months.
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BG Hokie
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Re: The state income tax problem nobody is talking about

Post by BG Hokie »

Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
Mcl3 Hokie
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Re: The state income tax problem nobody is talking about

Post by Mcl3 Hokie »

Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
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BigDave
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Re: The state income tax problem nobody is talking about

Post by BigDave »

That probably isn't getting changed. States are piggy-backing on the feds' enforcement of whether deductions are valid and they're going to be loathe to change it.

If you lie on your schedule A, you have the full force of the IRS coming down on you and that's a pretty big deterrent. The full force of the Commonwealth of Virginia is not as big of a deterrent.
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BG Hokie
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Re: The state income tax problem nobody is talking about

Post by BG Hokie »

LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
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Re: The state income tax problem nobody is talking about

Post by Mcl3 Hokie »

No, you’re not. Now don’t ask me what your fair share is, because my answer is more than now. Isn’t that the Democrat’s stance.
BG Hokie wrote:LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
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Re: The state income tax problem nobody is talking about

Post by BG Hokie »

No, Democrats want to raise taxes on the rich, not the middle class. I know you're trying to be slick with this, but just keep in mind I've never voted for a Democrat in a state or national election in my 20 years as a voter.
Mcl3 Hokie wrote:No, you’re not. Now don’t ask me what your fair share is, because my answer is more than now. Isn’t that the Democrat’s stance.
BG Hokie wrote:LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
CFB Apologist
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Re: The state income tax problem nobody is talking about

Post by CFB Apologist »

Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.

LOL "fair share".. who are you to decide that? If someone is legally paying their taxes, they are paying their "fair share" - if its not enough money for your liberal entitlement programs- too effing bad. But it has nothing to do with "fair share" - that's socialist nonsense.
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Re: The state income tax problem nobody is talking about

Post by CFB Apologist »

BG Hokie wrote:No, Democrats want to raise taxes on the rich, not the middle class. I know you're trying to be slick with this, but just keep in mind I've never voted for a Democrat in a state or national election in my 20 years as a voter.
Mcl3 Hokie wrote:No, you’re not. Now don’t ask me what your fair share is, because my answer is more than now. Isn’t that the Democrat’s stance.
BG Hokie wrote:LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
You're right... but to a democrat "rich" is 80K a year.. that's the problem.
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Re: The state income tax problem nobody is talking about

Post by Mcl3 Hokie »

I’m not a fair share person. It just pisses me off when people use that claim to raise taxes. It’s always easy to call for tax increases until they hit them. Then the whining begins.
CFB Apologist wrote:
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.

LOL "fair share".. who are you to decide that? If someone is legally paying their taxes, they are paying their "fair share" - if its not enough money for your liberal entitlement programs- too effing bad. But it has nothing to do with "fair share" - that's socialist nonsense.
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Re: The state income tax problem nobody is talking about

Post by BG Hokie »

CFB Apologist wrote:
BG Hokie wrote:No, Democrats want to raise taxes on the rich, not the middle class. I know you're trying to be slick with this, but just keep in mind I've never voted for a Democrat in a state or national election in my 20 years as a voter.
Mcl3 Hokie wrote:No, you’re not. Now don’t ask me what your fair share is, because my answer is more than now. Isn’t that the Democrat’s stance.
BG Hokie wrote:LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
You're right... but to a democrat "rich" is 80K a year.. that's the problem.
Eventually yes, Obama was stuck on $150K IIRC. Trump's tax proposal specifically hurts middle class to upper middle class tax payers who live in high income areas like New York, metro DC, and others. So it's fine for Trump to raise taxes on middle to upper middle class. Thanks Trump.
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Re: The state income tax problem nobody is talking about

Post by CFB Apologist »

BG Hokie wrote:
CFB Apologist wrote:
BG Hokie wrote:No, Democrats want to raise taxes on the rich, not the middle class. I know you're trying to be slick with this, but just keep in mind I've never voted for a Democrat in a state or national election in my 20 years as a voter.
BG Hokie wrote:LOL, we weren't paying our fair share previously? Why are you for raising taxes?
Mcl3 Hokie wrote:Why shouldn’t they pay their fair share to the federal government? Maybe the high tax states should become more fiscally responsible.
BG Hokie wrote:Good issue to raise. This tax bill blows for the middle class in higher cost of living areas. Thanks Trump.
You're right... but to a democrat "rich" is 80K a year.. that's the problem.
Eventually yes, Obama was stuck on $150K IIRC. Trump's tax proposal specifically hurts middle class to upper middle class tax payers who live in high income areas like New York, metro DC, and others. So it's fine for Trump to raise taxes on middle to upper middle class. Thanks Trump.[/quote]

Trumps deal gives a break to those making 75K per year.. in NOVA that is poverty...In Kansas City, that is squarely middle class. The median US salary is 40K or so... so yes, this is a "middle class" tax break in terms of median salary. Overpaid NOVA BA's that make 175K simply because they have a clearance have bigger fish to fry than tax breaks.
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Bay_area_Hokie
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Re: The state income tax problem nobody is talking about

Post by Bay_area_Hokie »

It will be interesting to see if people actually pour out of the high tax states(CA, NY, NJ). I have not really been following the tax thing as I have been super busy at work since summer on a new product launch. The $10K limit is a low. There is nobody who pays only $10K in property tax in Cali, if they bought a place in the past 5 to 10 years in a SF, LA or SD.

Just think about it. $1M doesn't really buy a house any more in the major area, but say it did. You'd have to make at least $200K to buy the house, and the prop taxes would be about $12K. Then you'd be paying about $15K in state tax(a guess), so you're in for $27K. So, you just lost a $17K deduction. Is that enough to make people move, probably not, but who knows.
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Techmomof2
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Re: The state income tax problem nobody is talking about

Post by Techmomof2 »

For those in Congress who don't want citizens (regardless of income) to get tax cuts, what loopholes do they use? What is their effective tax rate? What are their special deals?

I don't think anyone in this Country should have to pay a higher rate than the lowest effective rate anyone in Congress pays.
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Re: The state income tax problem nobody is talking about

Post by HokieFanDC »

Techmomof2 wrote:For those in Congress who don't want citizens (regardless of income) to get tax cuts, what loopholes do they use? What is their effective tax rate? What are their special deals?

I don't think anyone in this Country should have to pay a higher rate than the lowest effective rate anyone in Congress pays.

Why do you think that? Congressmen don't get paid that much.
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ip_law-hokie
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Re: The state income tax problem nobody is talking about

Post by ip_law-hokie »

HokieFanDC wrote:
Techmomof2 wrote:For those in Congress who don't want citizens (regardless of income) to get tax cuts, what loopholes do they use? What is their effective tax rate? What are their special deals?

I don't think anyone in this Country should have to pay a higher rate than the lowest effective rate anyone in Congress pays.

Why do you think that? Congressmen don't get paid that much.
If she wants to mention the tax rate paid by a lot of investment bankers then she’d be more on the right track IMO.

Though I wouldn’t be surprised if they have written themselves favorable tax treatment.


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Re: The state income tax problem nobody is talking about

Post by Techmomof2 »

ip_law-hokie wrote:
HokieFanDC wrote:
Techmomof2 wrote:For those in Congress who don't want citizens (regardless of income) to get tax cuts, what loopholes do they use? What is their effective tax rate? What are their special deals?

I don't think anyone in this Country should have to pay a higher rate than the lowest effective rate anyone in Congress pays.

Why do you think that? Congressmen don't get paid that much.
If she wants to mention the tax rate paid by a lot of investment bankers then she’d be more on the right track IMO.

Though I wouldn’t be surprised if they have written themselves favorable tax treatment.


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It's Congress, not investment bankers who are raising my taxes. They should pay the full rate they stipulate for the common citizen, plus same health care, live by same laws, etc.
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Re: The state income tax problem nobody is talking about

Post by cwtcr hokie »

I85hokie wrote:While everyone is caught up on the fact you won’t be able to deduct state income taxes for your federal income taxes (or capped at 10k at best), this is not that big of a deal, since the new higher standard deduction means millions more people won’t be itemizing now. What’s being overlooked is the actual amount of state income taxes that many pay will now be going up, unless state legislatures get busy right away. It boils down to one simple rule:

In most states, in order to itemize on your state return, you must also itemize on your federal return.

And in most states, the standard deduction is much, much lower than the federal one. In Virginia, the standard deduction is 6k for a married couple. In Georgia, it’s 3k. If you’re a taxpayer who normally takes the standard deduction, then it’s not a problem. But if you’re one of the millions of taxpayers who now falls in the sweet spot - itemized deductions less than the new federal standard deduction (24k for married) but more than the old one (I think 12.7K for married), your state taxes will definitely be going up. For instance, if you would have normally claimed 20k in itemized deductions for federal and Georgia purposes, now you will get the 24K standard for federal, but only 3k standard for Georgia. Since the top marginal rate in GA is 6%, kicking in at only 12k of income, that means your Georgia taxes will go up by $1,020 ((15k-3k) x 6%), which depending on your circumstances may more than wipe out any federal tax savings under the new law. In other states it could be worse.
Except for state taxes at least in NC and VA the state does not let you deduct state taxes if you itemize, you have to adjust the fed itemized numbers to not include the state tax
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