How 2018 Tax Bracket Will Affect You and Me? Landlords and Tenants Are Benefiting.

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It’s estimated that 65% of the people file itemized tax form. Now it’s estimate that 80-90% of the people will use 1040EZ form because the standard deduction has increased.

Let’s look at the Tax Brackets. I’m not going to list married but filing separately, because it’s never make sense to do it this way, almost 99.99% of the time.

If you’re single, here’s what your tax bracket looks like under the GOP tax bill, versus what you’re currently paying.

New Rate New Income Bracket | Old Rate Old Income Bracket
10% Up to $9,525 | 10% Up to $9,525
12% $9,525-$38,700 | 15% $9,525-$38,700
22% $38,700-$82,500 | 25% $38,700-$93,700
24% $82,500 – $157,500 | 28% $93,700-$195,450
32% $157,500-$200,000 | 33% $195,450-$424,950
35% $200,000-$500,000 | 35% $424,950-$426,700
37% $500,000+ | 39.6% $426,700+

For married couples filing jointly, here’s how the proposed rates work out under the GOP tax bill:

New Rate New Income Bracket | Old Rate Old Income Bracket
10% Up to $19,050 | 10% Up to $19,050
12% $19,050-$77,400 | 15% $19,050-$77,400
22% $77,400-$165,000 | 25% $77,400-$156,150
24% $165,000-$315,000 | 28% $156,150-$237,950
32% $315,000-$400,000 | 33% $237,950-$424,950
35% $400,000-$600,000 | 35% $424,950-$480,050
37% $600,000+ | 39.6% $480,050+

 

Let’s look at how different your 2017 vs 2018 paycheck. **Note that it might not account for local taxes and deductions.

** For single people, the best case scenario is you’re making $57,700 – $18000 (pre-tax 401k) to make your effective taxes rate from 22% to 12%. A saving of 10% or $5770.

** For married couple, the best case scenario is you’re making $201,000 – $36000 (pre-tax 401k for 2 people) making your effective tax rate from 22% to 12%. A saving of 10% or $20,100

  • =>> The Tax Bill is now stop penalizing married couple vs single.

I didn’t account for pre-tax on deductions like workplace health insurance, medicare and medicaid.

For landlord, this is the best scenario: The LOOP Holes:

*** Live in 1 room, and rent out the rest of the house, you’ll get to deduct interest payment, local tax, all the maintenance on the house as expense (except for your 1 room is for personal, which you can argue you use it as an office 1/2 of it). 😛 The big chunk is DEPRECIATION – over 27.5 years. Yep!! If you turn your house into a business, you can depreciate your house from the purchasing price.

Example:

  • Say a $300,000 house, you can depreciate $10K/year (this is a round number for easy calculation). A tax saving of $2,400 if you’re in the 24% tax bracket.
  • Say you have a $500,000 house, you can depreciate $20K/year. A tax saving of $4,800 if you’re in the 24% tax bracket.

*** Live the rest of the house and rent out 1 room. For a 4 bedroom house, you can deduct 1/4 from everything from insurance, taxes, depreciation, to maintenance cost.

 

*** Then you get to deduct $12,000 for personal deduction up from $7500. This is going to be awesome!! Let’s party you landlord you!!

 

This tax plan is benefiting the rich, no doubts – inheritance taxes, no?

Corporate taxes went down meaning your stock price will go up because companies will increase share buyback and dividend.

It won’t hurt landlord as there isn’t a big incentive to buy a house for current renters, as their standard deduction is double of what it was before.

If you haven’t bought a house, your family won’t ask you “when you’re going to buy a house?” anymore as there isn’t a big incentive to become a homeowner. (Maybe, in someway, the government is keeping up with the Millennials mindset of minimalist. LOL 🙂

 

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The losers for this whole thing is the Trump’s Voters – the people that were making low wages. There taxes went from 15% to 12% or 10% … that’s pretty much like making $30K, and the savings like $100. Ughhh!!

Maybe there will be more gridlock on the budget as the deficit is going to go wayyyy upppppppp, you’re see US debts will go way high.

More people will have more money, I wonder if they’d choose to invest or choose to spend. This could go either way. We all know the taxes cut doesn’t help the economy like the Reagan area or in Kansas or under the Bush administration. So, we’ll have to see.

More people will move from big city with higher home prices will feel the pain such as NYC, Chicago, LA, Seattle, San Francisco, Boston, etc. As tax deduction beyond $500K, or $625K (with 20% down payment), even that, it’s not guarantee if that taxes amount, insurance, interest would exceed the standard deduction.

More people will buy houses at lower cost living area. Maybe, we’ll see a price hike in housing in smaller or rural area.

How tenants can benefit from the new tax law?

1. Create a business, and use your rental house, apt, room as your office

  • Ok let’s hear me out, this is the Hustling Era. You tutor, you drive for Uber, you help your landlord getting tenants, etc everything you do, you’re still required or have an “office space per se”. Why not use your rented space as your office? At the minimum, you can deduct fifty percent as your business expense. 
  • You know the new lax law benefit business owners, create your own business is the way to go. 

2. More supplies, lower the price: The combination of tax decrease and low interest rate is optimizing the building and construction business. 

  • I was driving  around the 4-plex, where is is literally no land left to build. What do developers do? They take down abandoned wearhouse and turning them into aptments. That means more supplies. 
  • I also got on Facebook for the local market and saw a lot of people buying houses and trying to sublease their rental.


 

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For that, Landlords, Rejoice!!

 

GA

4 Comments

    • Congrats for getting thou$and$ in tax savings. I’m also going down to 24%. That’s probably ideal.

      As I don’t want to be in the 0% group, I don’t feel secure making below $30K although my basic living is $1350/mo.

  1. Last year my effective rate was 9.65%. It appears all the loopholes used are being closed and I’ll need to take a one year hit at 24%-32% to reduce the future amounts distributed from the IRA to either 0% or 12%. But then this assumes no changes to Social Security. (Increasingly proud not to have voted for Trump but would have preferred Kasich)

    • I don’t mind paying taxes in my part, but it’s cool to use all the taxes loophole as long as it’s legal. That’s why I’m paying my 2018 real estate taxes before 2017 ends so I get to claim it and itemized it in my 2017 taxes. As next year, I might be taking the standard deduction for our personal, and itemized for our LLC.

      I’ve been reading the news to see what people are doing and mirror, 🙂 I’m pretty sure by the year end, you can get yourself back down to 15% or even less. There’s always other angle 🙂

      I didn’t vote for Trump either as I really didn’t trust him to have the very low income people’s interest at heart.

      The GOP lowered my taxes when I didn’t asked for it. They lowered the extremely rich people taxes when they definitely didn’t need it. I don’t understand why we have to go into further in debt as a country. What’s wrong with having a well balanced budget?

      If they really want to help the un educated, lower income people, just create a huge infrastructure plan like Hoover did, make several high speed rails across America i80, i64, i95, i405 etc. It’ll benefit American in the long run, doesn’t help the very rich, lower transportation cost.

      Private companies will create many many jobs to keep up with the boom.

      But now, the rich has to think of ways to save many million more hihi.

      For now, I feel like my money or income is obsolete, I might have to work longer.

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