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How the New Tax Bill Affects You As a Retiree

Category: Financial and taxes in retirement

December 19, 2017 — The imminent passage of the Republican tax bill makes us wonder how our audience – retirees and people about to retire – will be affected by it. We will attempt to answer that question here, recognizing that everyone’s situation is unique and might be affected differently. We are not tax experts, but have tried to digest various media reports to provide this overview.

The bill will have direct effects on retirees in 2018, as well as some possible indirect effects down the road. Let’s look at each of those in turn.

Direct effects on retirees
1. Lower tax payments. With the exception of the people described in #4 below, almost everyone will pay lower federal taxes in 2018 than they do now. However, those cuts will expire in 2025.
Effect: Good news for retirees who pay taxes, except in those who live in high tax states. Who wouldn’t want to pay lower taxes!

2. The standard deduction is now much higher, at $12,000 per person vs. the current $6500. This means that far fewer people will have enough deductions to itemize, and filing will be simplified. On the other hand the current personal deduction of $4500 has been eliminated, so the net effect in the increase in the standard exemption represents an increase of only $1,350.
Effect: Positive for most people who currently don’t have many deductions.

3. Medical deductions. The threshold has been lowered so that expenses in excess of 7.5% of income can now be deducted, an improvement from the current 10%. As an example, if a man had an adjusted gross income of $50,000, he could deduct total medical expenses over $3750 (7.5% of $50,000). But to do that he would have to have at least $8250 in other itemized deductions to go over the $12,000 standard deduction
Effect: Since older Americans often face crippling expenses for hospital and other types of medical care, this last minute change to the law is a very positive development.

4. State and local tax deductions. Retirees who live in high tax states like NJ, NY, CT, MA, and CA – and who have significant incomes and or property taxes – will now only be able to deduct up to $10,000 for property, income, and sales (combined). A last minute change now allows these taxes to be combined, before the deduction only applied to property taxes).

As Mark Zandi (Moody’s Analytics) put it in the New York Times: “No one gets creamed more than New Jersey from this tax bill.”

Effect: Retirees affected by this provision, and the states and cities they live in, are going to be hurt badly.

5. Estate taxes. If you are a very wealthy retiree your heirs just got richer. The exemption threshold for taxable estates has been moved from $5.6 million to $11.2 million.
Effect: Great if you are very wealthy.

Indirect effect
1. Individual mandate. Starting in 2018 the penalty for not having health insurance is eliminated.
Effect: The effect on older people who are not yet on Medicare could be serious. Premiums will have to go up without healthier people in the insurance pool, and many people over 50 will not be able to afford insurance. States and localities will have to cover more uninsured people who get sick but don’t have insurance.

2. Medicare cuts. Under current “paygo” rules the $1.5 trillion the tax bill will add to the federal deficit requires automatic cuts in various federal budget items, unless Congress does something to stop that. According to the non-partisan Congressional Budget Office, Medicare would have to be cut by $25 billion next year.
Effect: Something will have to give in Medicare, which is not good for retirees.

3. Property values in high tax states. Many experts believe that property values in states in the Northeast could drop by 10% or more as a result of the reduced deductions for state and local taxes.
Effect: If you were considering moving out of one of the states to retire somewhere else, you just got another reason.

4. Cuts to Social Security and Medicare coming? Speaker Paul Ryan said on a talk radio show that “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit.”
Effect: Real reform to preserve the long term integrity of these programs would be great. But if Social Security and Medicare are cut without a solid plan, that is not good for retirees.

5. Inflation and interest rates. The projected increases in the federal deficit means the government will have to borrow more money, driving up interest rates and payments.
Effect: Most retirees don’t get new mortgages, so the effect on them is probably minor. If they own bonds or get interest payments it might be positive. A bigger deficit is not so great for our grandchildren though.

Bottom line
People are still trying to figure out exactly what is in this tax bill. Your situation is different from someone else’s, so to really know how the tax bill affects you you need to run some trial scenarios. Here are 3 calculators that can help you with that:
NY Times Calculator
This one from MarketWatch seems more sophisticated and offers more options.
CNN Calculator

For the moment we are going to permit Comments to this article, provided they are polite and don’t call anyone names. However we are limiting to 2 comments per person so we get to hear from a variety of people, and not get into endless rebuttals.

Posted by Admin on December 18th, 2017


  1. Can someone explain in what way Medicare would be cut 25 billion? If you are hospitalized would they pay the hospital less? If you have tests would they pay less for the tests?

    Same with Social Security. How would they cut it? Increase age eligibility? Make us take a pay cut?

    What really makes me mad is that they keep telling us how ‘wonderful’ all these changes will be.

    by Louise — December 19, 2017

  2. I feel a great disturbance in the Force. Those in Congress who have gone over to the Dark Side of the Force have voted themselves and their wealthy friends and, most importantly, their donors, a long-sought reduction in individual and corporate taxes. The Jedi will return and bring order to the Force and sweep out those who have gone over to the Dark Side in the 2018 elections.

    To be fair, wealthy retirees who have large stock holdings will probably do fine. Corporations won’t be doing much hiring or raising wages for employees but they will be raising dividends and doing stock buybacks. Good times for wealthy stock holders – unless we spin into another recession in which case there are no winners.

    Those on the other end of the spectrum who don’t have large stock holdings will not be so fortunate. Their tax reductions are temporary and they won’t benefit from the increased dividends and stock buybacks. They will also be subject to great anxiety regarding the almost certain cuts to the social safety net programs, i.e. Social Security, Medicare and Medicade.

    by LS — December 19, 2017

  3. This bill will help most retirees and most Americans. Wealthy property owners living in the suburbs of high tax states may pay more, but that is as it should be. There have been no cuts to Medicare in this bill, despite all the scare tactics. There needs to be reform in the Medicare and I can think of several changes that would be good for Medicare overall. Overall, I think this tax reform will be great for the country and will spur economic growth. If it isn’t the Republicans will be voted out. As far as the individual mandate, most of the people paying that penalty now cannot afford health insurance. It never made sense to me that the
    Cadillac tax was delayed indefinitely, yet the cost of the ACA was paid on the backs of the sick, disavled, and elderly with the 10% threshold and people who could not afford to buy insurance paid the penalty. I pray this tax reform works for the country!

    by Maimie — December 19, 2017

  4. Maimie, If you watch the news, there are many analysts who crunch numbers for a living and say this tax reform is bad. The ‘little’ people who do get some tax relief in the beginning will find in 2025 the relief comes to an end. The money large corporations are saving will not go into hiring, bring back work from foreign countries or increase workers pay but instead will pay the stock holders dividends and stock buy backs as LS has stated. This tax reform increases the deficit and Medicare and Social Security will be next on the chopping block. The only way health insurance works is if there is a mix of healthy and sick people. You can’t have all sick people in the pool and also have low insurance premiums. Just like car insurance. If the only people who bought it were those with DUI’s and tons of accidents, no one could afford car insurance. The insurace companies can’t go broke. It is a business not a charity. I am beyond shocked that this tax reform will probably pass.

    by Louise — December 19, 2017

  5. The rush to pass this important bill without proper consideration of everything contained in it is disturbing, to say the least. And the only reason it’s being rushed through is to satisfy the GOP big donors, who basically told lawmakers if they didn’t pass tax reform, to forget about future donations. There are many things happening in this great country of ours that are troubling, and this is one of them.

    by Linda — December 20, 2017

  6. Louise and all:

    Paul Ryan stated this morning on ABC that they are NOT going after cuts in Medicare or Social Security. They are interested in getting those who are of working age, and on welfare, back to work. He did say that providers who are found taking advantage of Medicare–they will go after, but not the beneficiaries. We will wait and see. I, for one, am tired of the scare tactics being put out by so called experts and endless speculation. I live here in DC and I can tell you the media will spin a story to its advantage depending on where they lean. There is a lot of wasted money and spending here in DC. If you do not like what you see happening–write your representatives here in Washington, DC…and keep writing and calling. Be relentless to let them know your views.
    Lets consider taking a wait and see approach, I for one being a former nurse want Medicare for all. Healthy people cannot predict when they might break a bone, or need a surgery. Everyone should be covered by a basic benefit.

    by Jennifer — December 20, 2017

  7. The bill is supposed to eliminate the alternative minimum tax, something which will b great for many of us! What good are deductions if the AMT kicks in and ads back anything the deduction would have saved and then some!

    by jean — December 20, 2017

  8. Dark side, Jedi forces, c’mon man. I challenge anyone with a rollover to say that their bottom line hasn’t improved (and improved greatly) since the mere mention of tax reform began to be bantered about. And if you don’t have money invested in the stock market, my ‘news source’ states that tax reform will benefit all Americans via job creation, increased wages, a corporate tax rate that will finally allow corporations to be competitive with the rest of the world — all resulting in an optimism that this country hasn’t seen in 10 years. So for once, why don’t y’all cut Trump and the republicans some slack and give credit where credit is due.

    by Alice — December 20, 2017

  9. I think the biggest issue with this tax bill is that they are doing it way too fast. They are using special rules so they need less votes. I would think if it was so great both parties would be working together to put together a great bill. The corporate tax rate would be find if they would close some of those loopholes. I don’t think they can have this huge tax cut plus all the loopholes. Whatever the rates are now – the corporations aren’t paying taxes at those rates – they are much lower. Remember the president was paying 0 taxes. And remember he blamed Clinton for not closing those loopholes.

    Not one company has promised to raise their employees wages with these tax cuts. So why does anyone think they will? Are the Trump companies going to raise wages? Are the Trump companies going to bring manufacturing jobs back to the US? Actually Trump hired people from outside the US to work at his resorts.

    It is correct that there are no cuts to social services in this tax bill. But the republicans have come out and said that afterwards they will have to make these cuts to make up for the huge tax cuts to the wealthy and corporations. Paul Ryan has stated that is his plan. It has been his plan all along. ] Paul Ryan and Mitch McConnell have both used social services in their youth. Now they don’t care about any of us who need them.

    I simply don’t think the president, his cabinet, and any politician should be made wealthier by this tax bill. I don’t think a bill that will effect every citizen of the US should be put together my only one party and with lobbyists putting their demands before we the people.

    As someone who is just going into retirement this is making me terrified of what might happen.

    by elsie45 — December 20, 2017

  10. Alice – those “promises” of what this tax reform “will do” are pie in the sky. I hope the fact checking websites continue monitoring those promises in the year to come. Then 2018, we can all look for the truth tellers to elect to represent us. If I were you, I would switch your “news source”, and I am truly sorry that there are so few truthful news outlets out there. I watch NPR myself and it is usually unbiased. I plan to take whatever paltry tax savings I receive in the 7 years from now until 2025, if any, and donate it to help elect folks who understand who they truly represent, the other 99%!

    by SandyZ — December 20, 2017

  11. I think this group is a highly intelligent, thoughtful bunch. To me, although I can’t predict the future of the entire tax package, I’m fairly certain of the following, however.
    Anyone who has been following Ryan’s career knows that he’s been wanting to cut any form of entitlements for years. so, thiis phase one. He has already publicly announced his plans. It’s no secret.
    Pass a tax bill with huge deficits in 2016. Then, follow it up with a plan to cut medicare and social security, due to the increased deficits that he , himself, championed. Than, as he has announced, he plans to leave congress and ride off into the sunset. Come on folks. He has already telegraphed it to us. Wake up.
    The corporate break. Everyone knows that the money goes back into stock buybacks for the shareholders.
    Now, even allowing for the possibility that corporate breaks will stimulate the economy, why, on earth, do those same rich business men, whom either work for, run or are invested in these corporations, which will grow in shareholder value, need additional personal tax cuts. We’re giving them one huge check. Do they need two?
    Will a few extra million to their personal accounts stimulate anything, except their bank accounts. Please!

    by Steve K — December 20, 2017

  12. Folks, I don’t have time to press my point. What with all the money we made on the stock market this year we’re taking our grandkids on a cruise, so I need to get packing. I’m sorry I spoke but I figured that there were plenty of others who are also enjoying their windfall. Minds rarely change, so arguing is futile. Good bye and good luck.

    by Alice — December 20, 2017

  13. Folks please give the tax cuts a chance to take hold before rushing to judgement and for heaven sake stay off CNN Fake News. It would take me an entire day to explain why the tax cut is good for all Americans and how it will grow established businesses and help start new businesses in our country and not overseas.

    Just so you know I’m retired and middle class and in no way in the upper class. I retired at 56 and know enough about finances and this tax plan will work for all Americans not just the upper class. The Democrats had eight years to improve our economy and it didn’t happen. I’ve made more money in my 401k this year than the entire eight years under obama. Sit back and enjoy the ride the best is yet to come!

    by Skip P — December 20, 2017

  14. Thank you for the last two comments. For awhile I thought I was reading comments on the AARP site. I’ve run the numbers on my own situation( I’ve recently retired, am 64, and can only afford the house that I live in). This plan will work, especially if Trump & others attack the waste generated by the government. The Democrats don’t want this President to have any success and they will do anything to harm him including trying to kill a good bill. It’s laughable Obama had the highest run up in history of the national debt and now they’re concerned about deficits? Give me a break and don’t insult my intelligence. Now Nancy Pelosi is saying this tax bill is causing me to steal from the government? Huh? That’s my money the government has been confiscating from me all of these years.

    by David — December 20, 2017

  15. I have studied the tax bill and I am convinced that this reform will be good for me, good for most Americans, and good for most of the country. Please don’t rely on Democrats and the press tell you without doing your own research and analysis. There have been a lot of lies and misrepresentations told in order to prevent Republicans from getting a victory and winning votes. The Washington Post gave the Democrats 4 Pinocchios for the lies they were telling. The FACT is that MOST Americans will get tax relief and there will most assuredly be a boost to the economy! Win-Win! A good day for most seniors.

    by Maimie — December 20, 2017

  16. I don’t understand why MD is not included among the high tax states. Both property and income taxes are quite high here and the majority of residents claim those taxes as deductions on their federal income taxes. For instance, my property taxes on a house valued at approximately $300,000 are over $6,000.

    Editor comment: You are correct Ellie, Maryland is one of several other high tax states affected by the tax bill. Illinois is another.

    by Ellie — December 20, 2017

  17. Someone hilariously and ignorantly said that Democrats had eight years to improve the economy, and didn’t do anything. It’s this kind of thinking that allows Congress to pass horrendous bills that will negatively affect us all.

    Let’s review. When Obama came into office, the Great Recession, which officially began in the fourth quarter of 2007, was in full swing. Home foreclosures were at record levels, job layoffs were running as high as 800,000/month, the stock market hadn’t fully recovered from when it plunged to less than 8,000 in GWB’s last year in office, and companies were going under. GM and Chrysler were about to go bankrupt, and the entire economy of the country was on life support. More than 40 million people had no health care whatsoever. According to Ben Bernanke, the 2008 financial crisis was worse than the Great Depression. (See his Aug. 27, 2014 article in Forbes.) Obama was elected during all this.

    Now, look at where things were at the end of Obama’s second term. The stock market was hitting record high after record high. Unemployment hit a low of 4.5% – less than half of its peak of 10% in his first year in office, and companies were earning record profits, and enjoying record productivity. The government was also paying down on the federal deficit that had risen substantially when he signed into law an economic stimulus package of nearly $800 billion, since too-big-to-fail banks and Wall Street abuses had pushed the economy to the precipice. GM and Chrysler were saved, thus saving the US auto industry, which could not have survived on Ford Motor Co. alone. (They later paid the loans back, with interest.) And more than 20 million people who didn’t have health insurance were now covered.

    In other words, rather than “doing nothing,” the Democrats turned the economy around in less than eight years. Bush left Obama a mess, and Obama cleaned it up.

    This new tax “reform” plan is nothing to a massive transfer of wealth from the working- and middle-classes to those at the very top. The tax cuts are temporary, but the cuts to corporations, and to estate taxes, are permanent. The deficit is expected to run up more than $1 trillion – greater than the controversial economic stimulus package passed by Obama – from this tax bill. And what do you suppose Paul Ryan and Congress will do to pay for the tax cut and keep the deficit from rising? Why, they’ll be coming after Social Security and Medicare and Medicaid, which seniors depend on. They’ll try to pay for the tax cuts, which primarily benefit the richest of the rich, by picking the pockets of those who depend on programs that were originally passed by Democrats, and strongly opposed by Republicans. I wonder how many retired people depend heavily on Social Security to get by. Should they now get less so that we can cut taxes for the Koch Bros, the Mercers, and for Donald Trump? I think not.

    by Gene L — December 20, 2017

  18. Gene…thank you so much for your comments. All you people who are Gung ho for this tax cut, please answer this question…..low income retirees do not file taxes so where would they benefit from this especially with their plans on cutting SS , Medicare and Medicaid?? Not everyone has a retirement fund to depend on…..

    by Mary11 — December 20, 2017

  19. Gene L. – you are right and hopefully the Obama bashers will realize to whom the credit goes for the excellent economy. We will certainly see how this new tax program works out for most Americans…I will not be taking my grandchildren on a cruise this Christmas vacation, instead I will hang on to the gains in my investment account for the inevitable day when this all comes crashing down. 2025 is just 7 years away and what else will be taken from us between now and then? Medicare, SS? In fact this “gift” of a trillion dollar deficit is a lousy, disasterous Christmas gift to all of our grandchildren!
    Politico released an analysis of the deficit going forward. The scariest point for me was that by 2025 the Ferderal government will be paying more in debt payments than for the rest of domestic spending. Translated to a personal budget, I can not imagine how dangerous it would be to be paying say 60% to debt and leave 40% for the rest of life’s necessities. I see nothing good in the future with this type of leadership. FEMA already stated that they are broke and broken – in future natural disasters, we “are on our own”. IRS says they have no money in their budget to implement the actual changes to the tax code. And both of these agencies have been severely cut in the current budget. For the life of me, how can we justify in order to give the 1% a big tax cut?

    by SandyZ — December 20, 2017

  20. Mary11, SandyZ THIS morning, Paul Ryan said they are not going after SS, Medicare or Medicaid beneficiaries–only the freeloaders who are on welfare and not working and providers who are cheating Medicare. The interviewer on CBS asked him directly about this. He was straightforward in his answer. Some people just want to believe the worst. President Obama was blocked in anything he tried to do by the Republicans. Now the Democrats want to do the same to the Republicans. Living here in DC…I feel behind closed doors–both parties are nearly the same. I have seen it over and over since moving here in 1979. Most of the country did not benefit under the Obama presidency period. Why? Because he could not get a lot done. Since we now have a Republican regime, I am willing to give them a turn and if it does not work then I will be on the doorstep of my representative on the hill. Take a wait and see approach for a while.
    While you say the Republicans want to cut SSA and Medicare, was that for current beneficiaries or future ones? The future beneficiaries, of which I am one, have had certain provisions modified however cuts have not occurred to the present beneficiaries that I am aware of. Yes the retirement age was prolonged for the future retirees and the file and suspend rules were modified for people born even in my birth year of 1954, but that needed to be done. As far as taking real cash from current beneficiaries, that I have not seen. What has happened is that there have been years when no Cola was applied and when the COLA’s were not keeping up with actual expenses–this year is a good example of that.

    I am curious as to what others have to say on this issue. Seniors are powerful voters and we need to get our views and fears known to our representatives, just as we do on this forum.

    by Jennifer — December 20, 2017

  21. Thank You Gene L ……you are the one with the correct facts. Folks here that think Paul Ryan isn’t going after the social benefits this country has offered retirees and others are living a pipe dream. I heard what Paul Ryan said and it was a distinct contradiction ……talking about how wonderful the Tax Bill was and how everyone would benefit from a reduction in taxes …..glossing over the deficit it will create ……………..and then in another breath, saying that they definitely will be taking on ‘entitlements’ in 2018 because of the extreme deficit. When listening to this…I couldn’t believe the interviewers didn’t question him on his complete contradiction between these two issues. Good Lord how anyone could think this man deserves being in Congress is beyond me.

    by Coelle Baskel — December 20, 2017

  22. No comment has yet mentioned the effect this law will have on charitable giving. I am pleased with a few provisions but more than disturbed by many of them. For people living close to the edge, 2018 may push them over. I started receiving my ss at age 62 for the very real reason that I cannot trust Washington to protect my earnings. Now only week away from my Medicare effective date, I still do not trust tbem. A majority of the American people are politically in the middle. Is it too much to ask our state and federal representatives to join us?

    Editor’s comment: Great question Diane about charitable giving. We have been reading some tax advice about how to react to the new tax bill, and some of that pertains to charitable giving. A lot of non-profits are concerned that the gifts they receive will drop precipitously because the threshold for itemizing deductions (total) is now $12,000 per person. They worry people won’t give because they won’t be able to deduct. Two ideas we heard seem reasonable: 1), give this year because the current standard deduction is still in place, and 2) bundle your gifts. Give to all your charities every two years so you get over the threshold. In our opinion, give even if you can’t deduct it. There are so many worthwhile causes that need our help.

    RE: Your comment about wishing Congress would find some middle ground – AMEN! But all of us have to the same, sadly, the politicians are reflecting their supporters.

    by Diane Richardson — December 20, 2017

  23. Coelie, you are 100% correct about Paul Ryan. I only wish someone would wake up and tell the American people that the SENIOR CITIZENS (70 1/2 yrs of age) are still paying for the BUSH tax cuts. You may make 6 or 7% on your investments, but because you might be 70 1/2 or older you are required to draw out 10% and pay taxes on that. I had an annunity that was intended to be used to bury us when the time comes. That is now mostly gone. Sure, the 10% (before taxes) is still mine, but now it is drawing 1% in the bank.
    The logic behind the 70 1/2 Law is that you have your accounts zeroed out by the time you die. I think it’s pretty bad when the investment companies ask you to predict when you are going to die, but that is how they calculate how much you have to withdraw.

    by Mel Thomason — December 20, 2017

  24. Can anyone answer this question: Under the previous tax rules, anyone 65 years old or older could add an additional $1,250 to their standard deduction. Is this still the case or has this been eliminated in the new increased standard deduction? Under the old rules a couple- if both are age 65 or older- could deduct a total of $23,300 ($15,200 + $8,100 for 2 personal exemptions). The new standard deduction for a couple (without the additional $2,500 ) is $24,000- not really that big of an advantage apart from the somewhat lower tax brackets.

    by Brigitte — December 20, 2017

  25. I trust the opinion of the majority of economists rather than the Republicans on the tax bill. I worked for SSA for 39 years. Throughout that time, the Republicans were always trying to cut benefits while the Democrats protected them. I live in Wisconsin, and Paul Ryan has been determined to cut Social Security, Medicare, and Medicaid for a very long time. (Look at Oklahoma where the Republicans cut taxes so much that many schools are open only 4 days a week.) SSA and CMS can’t locate and eliminate waste and fraud in these programs when hiring is frozen at the same time baby boomers are retiring. Dropping the individual insurance mandate is stupid because it costs everyone more when people without insurance go to ERs for care. The healthiest young person can be in an accident or get a terminal illness. The “Medicare Modernization Act” which includes the Part D Prescription Plans was passed by Republicans and signed into law by George W Bush in 2003. That legislation actually FORBIDS the federal government from negotiating lower drug prices. Clearly that bill was written for the benefit of the drug companies, not the middle-class.

    by Jean — December 21, 2017

  26. To Elsie45
    “We have to pass this bill so we can see what is in it.”
    One of Nancy Pelosi’s best quotes.
    At least they didn’t use that tactic to get this past.

    by Susan — December 21, 2017

  27. Bravo, Gene and others. I’ll see you at the polls. I talked to our company’s tax department and accountants to ask if I was missing something, and I didn’t hear a single good thing about the reports of this massive bill. They reminded me that there’s no such thing as a free lunch, and that the political gamesmanship to give taxpayers a few bucks now will cost our country a lot more for generations. That $1.5 trillion dollar additional deficit will crush taxpayers and our economy in the future. The Republicans are wrong if they think voters will forget which party is actually responsible for the inevitable future tax increases, inflation, devaluation of the dollar and more.

    by Kate — December 21, 2017

  28. Brigitte – “If you are over age 65, blind or disabled, you can tack on $1,300 to your standard deduction ($1,600 for unmarried taxpayers).” ~ From

    Not sure what happens if you’re unfortunate enough to be all three…

    Another summary from Thomson Reuters ~

    by Peder — December 21, 2017

  29. Gentle reminder. We are limiting people to 2 separate Comments on this article in an attempt to give everyone a chance to chime in and avoid plowing the same ground over and over again. If you post a third one we will, regrettably, have to delete it. Great conversation so far, let’s keep it going!

    by Admin — December 21, 2017

  30. One thing for sure and I suggest this is not debatable; if you do not get both sides of the story in terms of “news” you simply are not educated, you are indoctrinated. The truth is a puzzle. Both sides have pieces to the puzzle but they don’t always make those pieces known. Each side will “tattle” so to speak on the other side. However, if as I said you don’t listen honestly to both sides you will never have the whole truth. It means spending less time on goofy Hollywood TV programs and more time searching for the truth; but it’s worth it. As for me, finally allowing myself to get both sides of the story resulted in my switching political parties 35 years ago with absolutely no regrets. I know what’s going on and I know why. “And you will know the truth and the truth will set you free” Thanks! Dan O.

    by Dan O. — December 21, 2017

  31. Tax reform would have been a great idea. Get rid of the crazy quilt patterns that let certain groups get away with murder, just because they have good lobbyists and deep pockets. Eliminate “carried interest” that lets hedge fund managers pay at a lower rate than their secretaries. Stop real estate tycoons from getting unfair breaks. Or plug up rules that let corporations that earn billions escape with very little, or no tax liability. Unfortunately, the tax code remains at least as complicated and convoluted as it was before.

    Instead we gave away the store to corporations and, therefore, America’s wealthiest 1%. There were no real carrots and sticks in exchange, it was just a gift. And now we will add at least $1.5 trillion to our grandchildren’s national debt. In a time when the economy is nearly at capacity, no stimulus needed, thank you.

    But what galls me the most is the steady “talking point” that all Republicans have been trained to make in every announcement – “this is tax reform with the priority on the middle class”. What a cruel lie. If they say it often enough, they hope we will believe it. It is NOT a middle class tax bill, although we will all get a little something. It is a gift to the billionaire donors who put them in office. The only good news is that given the terrible approval ratings for this bill, the American people are too smart to fall for it!

    by Ken — December 21, 2017

  32. Now this is a good example of what I referred to in my first post. The complaint that those horrible rich people will get a larger tax break than us “normal” human beings only flies because most folks don’t know the rest of the story. I am solidly in the category considered “lower middle class” yet still willing to admit the truth which is; the reason those horrible rich people get a larger tax break is because they pay the vast majority of the tax burden and always have. Also, without those horrible corporations we would still be living in the stone age which by the way you can still do if you so choose. This is my 2nd post and since we are only allowed 2 posts on this subject I’m sure it will be followed by more than a few half truths I can’t respond to so, as I said in post # 1 be sure you get both sides of the story after which you will find yourself much better able to cope with reality.

    by Dan O. — December 21, 2017

  33. Guess what? When you have a tax cut generally the people who receive the most pay the most. What don’t you understand about a reduction in taxes. Obviously by reading these posts most of these people HAVE NOT read the bill or they would realize they are getting a tax break if they have any income at all. Most importantly the corporate tax rate has been reduced so that you will see a reinvestment in business investment and quite possibly an uptick in the stock market. Guess what? That’s a good thing. More investment=more jobs and a general positive nature. Hey SS gave out an increase for the first time in a few years. Huh. In a Republican admin.
    Being originally from New York, I no longer live there, hopefully this tax bill will get that state off its a.. and start cutting costs so it will not tax its citizens to death. Maybe then they will elect sane politicians again and not the likes of Schumer, Cuomo, etc. that want to spend, spend, spend.
    I’d also like to correct the people that suddenly are worried about the deficit. Where were they during the Obama administration when the Federal deficit rose 86%? 86%. Actually even though I support this tax bill I’m very concerned with the debt and we need to do something about it for our grandchildren. Hopefully one course of action will be to allow privatization of SS but that’s for another discussion. Another would be to cut the size of the federal workforce.
    Finally i am appalled at whoever is so disingenuous that they assume that charitable giving will come to a screeching halt because of a lack tax deduction. Shame on you.
    I read this site because I am interested in moving to a warmer clime to be near my grandchildren. Not for political discussion. In the future I really don’t come to your site for politics. Lord knows I can get that anywhere.

    by David — December 21, 2017

  34. Politics aside (and I don’t think anyone is going to change their minds on this), does anyone have anything to add about how the new tax bill is going to affect their retirement? The charitable donations was a good question. Anything else?

    by Admin — December 21, 2017

  35. Administrators, I am wondering whether paying state and local taxes in advance before the close of this year will be deductible on the upcoming taxes. Cankt seem to find an answer and my accountant is away for the holidays already.

    Admin comment: Good question Mamie. If you search the Internet you will find a lot of strategies (see link below). It is pretty clear you can’t prepay your 2018 state and local income taxes and count that as an exemption in 2017. Although you might be able to make advanced estimated payments. Property taxes are less clear. But if you owe state/local property or income taxes for 2017 you almost certainly can use them as potential deductions in 2017. So if you were going to delay paying 2017 taxes until Jan., pay them now. In 2018 you will only be able to deduct $10,000 in total state and local taxes. Always check with your accountant to be sure!

    by Maimie — December 22, 2017

  36. Well since we will only be earning $14000 in retirement, this tax bill will not impact me whatsoever except if they cut Medicare and SS…

    by Mary11 — December 22, 2017

  37. Maimie – It appears your leaders have already taken that tax dodge into account.
    Strangely, the corporations will still be able to deduct their SALT. Yes, strange that…
    I think this act (which started as corporate tax relief, but marketed as a middle-class cut), has had so many cuts piled on that now there is something for everyone with not that much left over for government operations like permanent war and the debt. And this when they now want to start a trillion dollar infrastructure program with what will now grow to a $22T national debt.. With an effective corporate tax rate of 9% going forward (since the base rate was cut to 21%, but the loopholes left open) I figure much of the corporate benefit will be drop-shipped to the C-Suite, with some used for share buybacks and dividends, with plenty left sloshing around for ill-timed, illogical, and over-priced M&A like ’99. Not really too sure how prudent it is to add still more economic stimulus when we are a fraction of a percent from a 50-year low in unemployment. Perhaps the government thinks interest rates will be zero going forward, but I doubt it. I remember the ’80’s. Selfishly, I would be happy to buy a non-callable 30 year government bond at 10%, just not with 14% inflation. At any rate, with the market at its current level, I have sold quite a bit of American issues and have moved some into International ETFs that exclude the US, feeling there is more value there and left the rest in cash waiting for the market to crack. It’s really to early to know how this will wash out in the year ahead since there are so many personal situations. I wish they hadn’t eliminated the insurance mandate. People don’t see to have any issue with mandated auto insurance at the state level, so why not health? Sure you can choose not to drive a car, but can you choose to not get sick? These folks will still get sick and use the ER (the highest priced health care available), not pay their bills and we’ll still get stuck with it through overall higher premiums.
    In short, I feel doubly blessed that I no longer have to worry about keeping my estate below $5.5M (lol) and that I have no grandchildren to pay for it!

    PS, re. investments – Buy low, sell high. Never be afraid to pay your taxes with someone else’s money.

    by Peder — December 23, 2017

  38. …Peder is having difficulty not only …. the velocity concept with money, let alone understanding that auto insurance can be sold cross-border and health can’t, whereas the now more demographic dominate millennial majority is more worried about their student debt ratio rather than will they get the sniffles. The ‘mandate’ didn’t work.

    There are too many external variables now that no one here can claim how to control. YOU have to play the cards you’ve been dealt – otherwise, one just fold’s up!

    by Rich — December 23, 2017

  39. I have a question for all the critics out there, what is your solution? Keep status quo which has produced 1.9% average GDP growth? This is about equal to the population growth resulting in a net zero growth per capita. To maintain prosperity we need net growth per capita which requires a minimum 3% in this environment. What the tax bill is trying to do is bump up spending but more importantly improve sentiment about the future. To sustain growth requires optimism about future growth. Free market capitalism is a feedback process, driven by the collective sentiment of its participants. It’s an inherently unstable system but it’s proven to be the best we know to generate new economic value. It’s how America became the most powerful economy. And, until someone comes up with a better economic model, the success of our country is dependent on it. We tried our version of European social democracy the last couple of decades and we now know that doesn’t work.
    Regarding the deficit, it’s a potential disaster if we lose the confidence of bond holders, which will probably happen eventually if our economic growth stays in per capita stagnation. Austerity causes negative sentiment which reduces economic growth. Our only way is to make a change to boost sentiment thus growth. Maybe this will work and maybe not. But at least we are making a change with some chance of working.
    Also note, that all the naysayers out there are actually causing negative sentiment and without providing any viable alternative solutions.
    Thanks for considering the information provided here.

    by Tom B — December 23, 2017

  40. Rich/Tom,

    Great insight and comments! Thank you for sharing, Too much negative press and outright lies regarding the tax cuts. If there is one flaw in the tax cuts it’s the lack of Republicans getting their message to the American people.

    by Skip P — December 23, 2017

  41. My two cents, in echoing the words of a c&w hero of mine:

    “I’m here to tell you, boys, things aren’t going well in this country and they’re getting worse . . . I’m not sure we can turn it around. I got to think that one of these days somebody’s going to fight back. I don’t know how and I don’t know when, but it’s coming, and when it does, all hell is going to break loose. I’m talking like I mean it, ’cause I’m scared.”

    Merle Haggard speaking to Rolling Stone Magazine (RIP, Merle, April 4, 2016)

    by Ellen — December 23, 2017

  42. This is not tax reform but a give away to Corporations and wealthy. None of the major loop holes have been filled except for the SALT deductions for individuals. They talk about us having the nearly the highest corporate rate in world, but no corporation pays that rate given all the deductions and loopholes that are made available. They were many other ways to force corporations to bring their foreign cash back into the US and attempt to stimulate growth. This plan does not do it, nor does it take into account the global labor pool markets available for international corporations. The coal industry is not coming back. The auto industry is not coming back, unless it contains massive automation and payback to locate within the US. Manufacturing will move to the lowest possible cost areas.

    by George — December 24, 2017

  43. Hi folks,

    I wrote an earlier comment on the tax reform bill. I’ve always considered myself an independent, moderate voter. This theft of the poor and middle class to enrich the already rich, has just gotten to the point that, come next November, if there’s a democrat on the ballot, they have my vote. Then again, I’m in Massachusetts, so who cares.
    The obvious choice by the republicans to put it to Massachusetts, New York, Delaware, New Jersey and California, states they know go democratic, is just so transparent, that it makes me sick.

    by Steve K — December 25, 2017

  44. Good comment, Steve – and interesting analysis, Pedar. I was a moderate Republican for 40 years, who became a moderate registered Democrat when the far right seemed to take over the Republican party. Moderates have lost our voice in Congress these days. Assuming the candidate isn’t a lunatic, I’ll vote Democratic too (in S.C. this year..probably.moving back North next year) in the hope that we will have a balance of power again between the legislative and executive branches. I have been trying to read the tax bill. At over 1,000 pages, with 503 pages of legislative text, I find it to be confusing even with a doctorate. Since there was only a week between release and voting, I don’t think anyone who voted on it could have fully analyzed this bill.

    I might be a little happier if the tax cuts that affected individuals were permanent like the tax cuts on corporation. As it is, that 8-year term appears to be blatantly political. We can expect future candidates in 2020 amd 2024 to pander to voters by promising to continue the cuts, or to be attacked for having to increase taxes because of the deficit.

    In the meantime, analyists and criics continue to come out with additional information on what’s actually in those 503 pages: for ex,

    This is my 2nd/last comment, but I am enjoying reading both perspecitives that are being posted on this thread.

    by Kate — December 26, 2017

  45. Promoting lower taxes almost always means cutting important public services. And this is a consideration for retirement. Those public services include transportation for seniors, additional homestead exemptions on property tax for seniors, and many services for economically-challenged seniors, etc. Even road conditions and safety measures affect seniors. When we drive through South Carolina, a low-tax state, on I-95, for example, we notice the condition of the road is poorer than in other states. Cutting the deduction for both state income and local taxes to $10,000 was drastic. It is currently unlimited. $15-25,000 would have been a more reason amount. Instead, the new tax bill cuts the highest bracket for wealthy taxpayers by 9.4%. Only a very small number of retirees are in the top tax bracket.

    by Clyde — December 26, 2017

  46. This bill will hasten the exodus of retirees from NJ and the other high tax states. A good move for them….a bad move for the taxpayers in those states. Perhaps they will pressure their state and local politicians to lower state and local taxes…..perhaps.

    by Sal Monella — January 1, 2018

  47. It is entertaining to read the comments above….particularly the poor conditions of roads in low tax states. Anyone who has travelled around the NY metropolitan area will laugh out loud at this comment.
    Also hysterical is a Massachusetts voter blaming the Republicans for their high tax rates……not to mention the complaint by another that the bill runs out in a decade…….as if the economic and political climate won’t change by then. Perhaps at that point a better economic growth bill will emerge.
    The bill cuts taxes for everyone except a few rich people mostly in the Northeast and California . It will stimulate business, create jobs and grow the economy which is essential to halt the entitlement disaster we will reach in a few years. Since SS and Medicare (entitlements though they really aren’t) affects retirees criticism of this bill is purely
    ideological and mirrors talking points from the far left wing (sadly most of it today) of the Democratic Party.

    by Sal Monella — January 1, 2018

  48. Having lived in metro NYC and Mass (and CT) I agree – your comments are on point.

    Also if you want to see bad roads check out metro Detroit area.

    You also nailed it with the ideological comment. I am an Independent that does not align completely with Dems or Repubs, but do with you.

    by BeckyN — January 2, 2018

  49. So, as the this group’s prestidigitators justify their personal positions, please let me throw into the stew, and from mine in America’s most expensive, a dash of real numbers to chew on.

    by Rich — January 2, 2018

  50. Rich – An interesting parallel between your link and the states receiving the most federal aid.

    by Arne — January 2, 2018

  51. Arne … as @ 11/20/17 states: “Now that Congress is debating eliminating the SALT deduction… States that receive less federal funding can afford to do so because they collect more taxes from their residents, and keep those taxes in-state to use for only their residents, therefore not needing as much funding from federal government. But due to the SALT deduction, a guy earning $1 million in California pays roughly $50,000 less in Federal taxes to the federal government than a guy earning $1 million in Florida (no state income tax). Same income, but the feds collect more from the Floridian The residents in Florida are therefore subsidizing the residents in California, so the state of California can keep more of that million dollar-earner’s money in their state to spend on Californians.”

    by Rich — January 3, 2018

  52. Just did a rough calculation based on my 2016 taxes. With the elimination of the personal exemptions, increase in the standard deduction and a slightly lower tax bracket, it will cost us approximately $1200 more in taxes assuming the same income.

    by Kathy Coaker — January 4, 2018

  53. I would suggest a professional assessment of your individual tax situation before you make assumptions. The professionals do not have the entire details yet, som don”t assume.

    by JeffL — January 5, 2018

  54. Please let everyone know what state you live in when talking about new tax program impact.

    by Ralph — January 6, 2018

  55. Well, it’s almost impossible to pay more for middle class people. With the 15% bracket dropping to 12% and the 25% bracket to 22%, this reduces taxes much more than just about any normal possible loss of deductions (including exemptions). My taxable income goes up by $6875 but I will save $568 in taxes with the new plan. The top of the 15% bracket is at $77,400 taxable income so the tax savings is $1,750.50 in this bracket alone with the lower tax rate in the new tax plan. If your taxable income is in the middle of the 15% bracket ($48,225) your taxes go down by $875.25. For people that now take the standard deduction, their taxable income will drop by $2,700 because the increase in standard deduction to $24,000 is $2,700 higher than the originally announced 2018 standard deduction of $13,000 plus (2 times) the personal exemption of $4,150, resulting in extra tax savings of $405. Note that this analysis is for the case of married filing jointly, and single filers will see the same general effect but at about half the numerical values.

    by Tom B — January 6, 2018

  56. I could not agree more with you Tom B.

    by LMB — January 6, 2018

  57. Under the previous tax rules, people 65 and over got an additional standard deduction over and above the regular standard deduction. Can anyone confirm this remains true with the new 2018 tax changes? I have heard that these additional 65+ deductions remain and will be $1250 or $1300 person. So if a married couple files jointly, they will receive the $24000 standard deduction, if they don’t itemize, plus two $1300 additional 65+ deductions, for a total of $26600. Is this correct?

    by Clyde — January 6, 2018

  58. I found this in a 19 December article from what I believe to be a reputable source:
    “One of the biggest changes is that the standard deduction is basically doubled, to $12,000 (single) or $24,000 (joint), $18,000 (head of household), and in an interesting provision, persons who are over 65, blind or disabled can add $1,300 to their standard deduction. The current standard deductions in 2017 are $6,350 for (single), $12,700 (joint) and $9,350 (head of household).”
    So, yes, the extra exemption for over 65 is now included by providing a higher standard deduction for being over 65.

    Editor’s comment: Thanks Tom for helping out with this answer. We looked too and there isn’t much published on the subject – we guess people over 65 aren’t that interesting! From what we found on AARP you are correct, although the amount of the over 65 exemption they list is slightly different from the one you found. They say the: “…tax plan also maintains the extra standard deduction for those 65 and older, currently $1,250 for individuals, $1,550 for heads of households and $2,500 for couples who are both 65 and older.”

    by Tom B — January 7, 2018

  59. Tom B, Thanks. I believe the extra deduction for 65+ also existed before the new bill, but was interested as to whether it was left in. It seems to be.

    by Clyde — January 7, 2018

  60. Rich – Then maybe the Feds can take our SALT deductions, but then can send us in IL back 100% of the dollars we send to DC, rather than the current 45 cents on the dollar…

    by Arne — January 7, 2018

  61. When I see something here that doesn’t quite comport with the facts, I feel a need to point it out. The “Feds” didn’t take our SALT deductions. The Senators and members of Congress who voted for the tax bill did. We often want to lump our complaints into what the “Congress” did, but we must remember that those who didn’t vote for a particular bill are not the ones responsible for what’s in it or its results. Whether we like or dislike a piece of legislation, we can later express our voices at the ballot box, depending on how our particular Senators or Representatives voted.

    by Clyde — January 7, 2018

  62. KHEM for 2020!!!! We need folks like you to make some BIG changes!

    by SandyZ — January 8, 2018

  63. Tom B Thank you for sharing great insight on the new tax plan.

    by Skip P — January 8, 2018

  64. Does anyone know when the new tax forms will be available so we can compare our taxes owed?

    by Florence — January 12, 2018

  65. Seem like a SS discussion, I thought there was a blog post for that.

    Editor’s Comment:
    THanks for helping us get back on track Bruce! We have moved the SS related comments to

    If you have comments about Social Security please post them on that blog.

    by Bruce — January 13, 2018

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