Author Topic: Trump-Republican tax plan, Bad for large families  (Read 52979 times)

Offline Ygold

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Re: Trump-Republican tax plan bad for large families
« Reply #360 on: December 04, 2017, 09:42:25 AM »
So for us not accountants out there, does it make a difference if your llc is set up as single member or as a partnership?
Shout out to Meshugener!

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #361 on: December 04, 2017, 10:52:35 AM »
Don't forget that the Corp rate is a double tax. The Corp will pay 20% and then when you get your share of the profits as dividends you'll pay another 20% on your personal return.

For accuracy's sake, let me just clarify that the top personal rate on dividends is 20% + 3.8% NII tax, for a total of 23.8+20 corp=43.8%

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #362 on: December 04, 2017, 11:11:31 AM »
Can anyone help me understand the pass through deduction, and how it works?
To keep things simple, let me try to present an example.

Suppose someone has a LLC or partnership that earns $100k in sales. After $25k in expenses, his final net income is $75k. That is his entire household income. So his household income is normally  $75k on his tax return, thus putting all his income in the 10-15% brackets.
He pays no employees and all his money from the business account goes into his business account, and then he takes money from there to live on whenever needed.

Does such a person get any deduction from the 23% pass through rate? He doesn't officially pay any wages to anyone. But that's how he lives.
Its the pass through limited to the lesser of either 23% off your pass through income OR half your wages expense (whatever that means)?

So does he get any break at all?

Thanks

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #363 on: December 04, 2017, 12:23:43 PM »
Can anyone help me understand the pass through deduction, and how it works?
To keep things simple, let me try to present an example.

Suppose someone has a LLC or partnership that earns $100k in sales. After $25k in expenses, his final net income is $75k. That is his entire household income. So his household income is normally  $75k on his tax return, thus putting all his income in the 10-15% brackets.
He pays no employees and all his money from the business account goes into his business account, and then he takes money from there to live on whenever needed.

Does such a person get any deduction from the 23% pass through rate? He doesn't officially pay any wages to anyone. But that's how he lives. it seems like no.
Its the pass through limited to the lesser of either 23% off your pass through income OR half your wages expense (whatever that means)? Correct. If wages are 100k then you'll only get the 23% deduction on 217k of pass through income (50k benefit).

So does he get any break at all?

Thanks
« Last Edit: December 04, 2017, 12:30:24 PM by yitzf »

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #364 on: December 04, 2017, 12:26:20 PM »
If passed what tax year will it be for?
IINM the only tax bill passed during my adult life that was retroactive to January of the year passed was in the Clinton era. I don't know much of the details as I am not sure if I even filed a return at the time, but I remember the buzz going around about how dare they pass a retroactive tax bill.
« Last Edit: December 04, 2017, 12:33:42 PM by ExGingi »
I've been waiting over 5 years with bated breath for someone to say that!
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Offline Dan

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Re: Trump-Republican tax plan bad for large families
« Reply #365 on: December 04, 2017, 12:32:49 PM »
IINM the only tax bill passed during my adult live that was retroactive to January of the year passed was in the Clinton era. I don't know much of the details as I am not sure if I even filed a return at the time, but I remember the buzz going around about how dare they pass a retroactive tax bill.
Were none of the Obamacare taxes retroactive to 1/1?
Save your time, I don't answer PM. Post it in the forum and a dedicated DDF'er will get back to you as soon as possible.

Offline Boruch999

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Re: Trump-Republican tax plan bad for large families
« Reply #366 on: December 04, 2017, 12:35:06 PM »


I'm confused.  I thought pass through meant that the entity is not taxed at all and that all tax liability is passed through to the shareholders at what ever rate they get taxed on their household income.  If so, the cap should only kick in if the rate they are taxed is higher than what ever the cap is.  In the case the OP posted, the household tax bracket is 10-15% so the cap is irrelevant.  What am I missing?

Offline ExGingi

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Re: Trump-Republican tax plan bad for large families
« Reply #367 on: December 04, 2017, 12:35:18 PM »
Were none of the Obamacare taxes retroactive to 1/1?
Can't recall. Obamacare had so many other fallouts to deal with, that this detail currently escapes me.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline churnbabychurn

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Re: Trump-Republican tax plan bad for large families
« Reply #368 on: December 04, 2017, 12:38:24 PM »
Can anyone help me understand the pass through deduction, and how it works?
To keep things simple, let me try to present an example.

Suppose someone has a LLC or partnership that earns $100k in sales. After $25k in expenses, his final net income is $75k. That is his entire household income. So his household income is normally  $75k on his tax return, thus putting all his income in the 10-15% brackets.
He pays no employees and all his money from the business account goes into his business account, and then he takes money from there to live on whenever needed.

Does such a person get any deduction from the 23% pass through rate? He doesn't officially pay any wages to anyone. But that's how he lives.
Its the pass through limited to the lesser of either 23% off your pass through income OR half your wages expense (whatever that means)?

So does he get any break at all?

Thanks
He doesn't pay any se tax? ;)

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #369 on: December 04, 2017, 01:09:00 PM »
I'm confused.  I thought pass through meant that the entity is not taxed at all and that all tax liability is passed through to the shareholders at what ever rate they get taxed on their household income.  If so, the cap should only kick in if the rate they are taxed is higher than what ever the cap is.  In the case the OP posted, the household tax bracket is 10-15% so the cap is irrelevant.  What am I missing?
The is a difference between the house and Senate bills. In the house bill you are correct that the lower pass through rate won't help if the taxpayers personal rate is lower, but the Senate Bill is a deduction and would help anyone.

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #370 on: December 04, 2017, 01:10:12 PM »
He doesn't pay any se tax? ;)
How would that help? The bill says specifically W-2 wages.

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #371 on: December 04, 2017, 01:12:28 PM »
He doesn't pay any se tax? ;)
Of course you do.
If you are active, you pay SE tax on everything.

Offline yitzf

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Re: Trump-Republican tax plan bad for large families
« Reply #372 on: December 04, 2017, 01:28:09 PM »
Can't figure this out
https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf page 23 says that "the deduction is limited to 50 percent of the W-2 wages of the
taxpayer." Shouldn't if say the W-2 wages of the partnership?
The text of the bill says "50 percent of the W-2 wages with respect to the qualified trade or business".

Offline churnbabychurn

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Re: Trump-Republican tax plan bad for large families
« Reply #373 on: December 04, 2017, 01:32:21 PM »
Can't figure this out
https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf page 23 says that "the deduction is limited to 50 percent of the W-2 wages of the
taxpayer." Shouldn't if say the W-2 wages of the partnership?
The text of the bill says "50 percent of the W-2 wages with respect to the qualified trade or business".
Very simple, It's limited to 50% of the w2 wages earned by the tax payer related to this respective business.

W-2 would include all distributions from a sp ? And the salary amount from a 1065?

Offline Deal Guy

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Re: Trump-Republican tax plan bad for large families
« Reply #374 on: December 04, 2017, 01:36:06 PM »
is Guaranteed payments considered w-2 wages in order for a partnership to receive the deduction?