Mortgage Deduction and the Child Tax Credit

[Funkworks]

... Start a thread on the mortgage deduction or the child tax credit and I’ll be happy to comment.

 

[ThirstyBarbarian]

Yeah! Me too! I’ll be happy to comment.

 

[Funkworks]

 

[afadeev]

 

[Hobie1dog]

renting and kids long gone i have limited input

 

[dhbarr]

I put tax-looking papers in the gallon Ziploc. Around February it goes to the tax person. Later I sign some stuff.

 

[mh9162013]

I put tax-looking papers in the gallon Ziploc. Around February it goes to the tax person. Later I sign some stuff.

I envy you.

 

[Blast it Tom!]

Well that ended quickly...

 

[Bravo52]

I will comment and say the first tax year after no mortgage deduction and your last child graduates.... it's a doozy. I'm pretty sure the IRS sent me a sympathy card with a smiley face on it...

 

[jderimig]

I will comment and say the first tax year after no mortgage deduction and your last child graduates.... it's a doozy. I'm pretty sure the IRS sent me a sympathy card with a smiley face on it...

Finally paying your fair share....

 

[Blast it Tom!]

Finally paying your fair share....

Ouch!

Interesting when they jacked the personal exemption 'way up that it then exceeded my ability to itemize. So even if we pay $10k in deductible taxes and another $10-$15k in charitable contributions, without the (now outrageous again) mortgage interest and it's deduction we don't meet the threshold to itemize. Which means we're getting a break, i.e. if the std. deduction for a pair of Olde Codgers is $27K and my deductible taxes and charity only comes to $20k, I make out - that's $7k I don't have to pay taxes on.

I think it says something horrible about the tax code that a very ordinary fellow, living on SS and some part-time consulting, with some savings in a mutual fund and a simple health savings account, has their tax return run to 14 pages and 9 schedules. Two pages are just for that HSA, and I put the same number twice - how much did you withdraw, and how much did you spend on allowable medical expenses. I know another fellow who did his own taxes year before last, as his family had a farm and some oil wells on it, and his return ran to 160 pages. He had always done it himself, but now has "retired" from that and pays someone.

I hope I'm not taking this into rant and rave territory, just trying to point out a few things. Yearly we pay wage tax to the schools and the local government - real easy, 1%. Then the real-estate based taxes, again, once a year, real easy (if burdensome) - here's what you owe, here's when it's due, hey! You get a 2% discount if you send it in by X...! But PA state income tax is getting increasingly complex, and now they want payments throughout the year for your "estimated tax" - and wanted to ding me $17 for not sending enough estimated tax in during the year on $740 lousy bucks, when the local school board can wait all year for 4 times that much.

And then you get to the Federal income tax and the explosion in complexity is exponential upon exponential, with all sorts of social engineering complexity built into it, so that many, many ordinary people have to go to a paid preparer and spend a significant chunk of their return just to get the thing.

And they are still broke six ways from Sunday, supposedly to "help" us. I've posted before here and other places, and I keep track of it from time to time - $1 million in $1 dollar bills laid flat would reach 358' 4" tall, just a few feet short of our beloved Saturn V moon rocket. And there aren't too many of us here for which receiving $1 million dollars wouldn't be a "Shazam! Hallelujah!" moment. But in the same terms, our current national debt would go to the moon - 9 TIMES!

There is only one place to lay this responsibility - or blame for this irresponsibility: The 545 people on whom the ultimate authority rests: 1 President, 9 Supreme Court justices, and 435 Congresscritters, who love to preen and crow about all the money they bring back to their districts. This isn't about Republican/Democrat, the bad orange man or the bumbling buffoon - in one way they are distractions, Congress is supposed to be the one spending the money. If my personal income stream and debt load and expected expenditures looked like the Federal government's, I'd be in tears begging for a bankruptcy attorney. And still they hold themselves out as modern-day messiahs.

Ok, I could go on but I have to get work done. Mods, I apologize in advance if this crosses a line and do your thing. Seriously. There is no intent here to get a flaming political thing going. I'm just saying, in my opinion, we have a big, big problem with credit card debt at the national level, and those 545 people hold all the responsibility.

 

[FredA]

Flat Tax please.

 

[Blast it Tom!]

Flat Tax please.

I hear you, but it's very telling that the proposed figure being bandied about (as a national sales tax) is 30%

 

[Antares JS]

I hear you, but it's very telling that the proposed figure being bandied about (as a national sales tax) is 30%

It's still worth considering IF the income tax was eliminated in exchange and necessities like food were exempt.

 

[Bravo52]

Finally paying your fair share....

Depends on your definition of "Finally" I think I've been paying my so-called "fair share", some of my neighbor's fair share and some of that downtown dude's fair share, for most of my working life. I could be wrong tho... I realize my hard work is finally paying off to the point I have the privilege to arbitrarily pay more for things just because at some point in my life I figured out I really didn't need to finance a Walkman and a new Members Only jacket.

 

[ThirstyBarbarian]

… at some point in my life I figured out I really didn't need to finance a Walkman and a new Members Only jacket.

Was that around 1986 for the Member Only jacket and maybe 1996 for the Walkman? About 25-35 years ago when those things went out of style?

 

[mh9162013]

Our tax code is complicated for various reasons. One of the biggest is that the IRS is a quasi-social welfare administrator.

Until Congress finds another way to administer some of its social programs (healthcare, child tax credits, etc.), there will be no flat tax and the tax code will continue to be complicated.

 

[Blast it Tom!]

Our tax code is complicated for various reasons. One of the biggest is that the IRS is a quasi-social welfare administrator.

Until Congress finds another way to administer some of its social programs (healthcare, child tax credits, etc.), there will be no flat tax and the tax code will continue to be complicated.

Or get out of that business entirely. If I don't have enough to give to charity, then I don't give. And they clearly do not. This does not mean I am uncompassionate toward the poor - but let's not derail it.

It's still worth considering IF the income tax was eliminated in exchange and necessities like food were exempt.

Perhaps; it'd be grand to pare the IRS back to a fellow in a broom closet with a calculator. But right off, you start the complexities again!

I think (oh Father in Heaven I hope) that if a 30% flat tax on all sales went into effect, the increased revenue would be so great that they'd have to cut the rate. I may be wrong. But I think the whole purpose of proposing such a preposterous, clearly regressive rate is to illustrate just how bad the problem at the top actually is.

 

[ThirstyBarbarian]

Our tax code is complicated for various reasons. One of the biggest is that the IRS is a quasi-social welfare administrator.

Until Congress finds another way to administer some of its social programs (healthcare, child tax credits, etc.), there will be no flat tax and the tax code will continue to be complicated.

True. That is a big part of it. And the main reason for spending in the tax code is political. It’s a lot easier to pass this kind of “spending” if it is not considered spending and is passed as a tax deduction or a tax credit or other form of “tax cut”. And it’s harder to repeal this kind of spending because doing so is framed as a “tax increase”. It also makes it harder to figure out the exact costs, because it’s not paid out as checks from the Treasury — it’s money not collected.

Pretty much all tax deductions and tax credits are a form of government subsidy, even the really longstanding ones. The mortgage interest deduction is the government subsidizing your mortgage payments. Charitable donations are the government subsidizing your charitable giving. 401(k) and IRA deductions are the government subsidizing your retirement.

 

[boatgeek]

And then you get to the Federal income tax and the explosion in complexity is exponential upon exponential, with all sorts of social engineering complexity built into it, so that many, many ordinary people have to go to a paid preparer and spend a significant chunk of their return just to get the thing.

The really stupid thing about the complexity is that the IRS already knows enough to calculate the taxes for ~80% of the population. They could send you a sheet in the mail; you could check it over, and send it back in. If you don't agree or have other income, send in your own tax return. They already fundamentally do this work when processing your tax return, so why not just do it up front? Failing that, why not make their tools readily available for the general public to use? The reason is H&R Block and Intuit. They make bank every year getting people through tax time and they don't want to have the IRS going ahead and giving that public resource away for free. Freefillableforms is a good start for federal taxes, but it's still a bit clunky.

The thing that really pissed me off two years ago is when they changed the dependent deduction from a single line with maybe a 4-line worksheet in the instructions to a 2-3 page standalone form. I only have three more years of filling that out, though.

I hear you, but it's very telling that the proposed figure being bandied about (as a national sales tax) is 30%

What's weird is that as a 1.25 income married couple filing jointly, one dependent, no crazy deductions household with an income above median, I pay about 9%-10% of my income in federal income taxes (not including social security and Medicare). I do the check every year at tax time.

Sales taxes and flat taxes disproportionately impact those at the lower end of the income scale. If you like Warren Buffett paying a lower percentage of his income in taxes than his secretary, you'll love a sales tax. Also, if you really believe that a flat tax will be applied to every kind of income, I have a lovely piece of seafront property in Arizona to sell you. There's a reason hedge fund managers have special tax status and it's not because of their critical importance to the economy. It's because they help write the tax law, and they aren't going to stop helping to write the tax laws in ways that benefit them. That's as far as I'll go into the politics.

 

[Antares JS]

The reason is H&R Block and Intuit. They make bank every year getting people through tax time and they don't want to have the IRS going ahead and giving that public resource away for free.

*Calmly purchases a few torches and a pitchfork.*

 

[James Duffy]

I put tax-looking papers in the gallon Ziploc. Around February it goes to the tax person. Later I sign some stuff.

The money I spend on an accountant is among the best money I spend each year. Much like you, I throw everything in a folder, pass it off when the flow of documents slows to a trickle, answer a few follow-up questions on the phone, and write a check or two. Easy peasy!

 

[jderimig]

Our taxes are too LOW. Raise taxes across the board (personal + corporate) to cover Fed government spending and positive changes to the broadly broken system will happen very quickly.

 

[Blast it Tom!]

Our taxes are too LOW. Raise taxes across the board (personal + corporate) to cover Fed government spending and positive changes to the broadly broken system will happen very quickly.

You are correct. To be fiscally responsible, they either have to spend less or tax more, real simple.

 

[ThirstyBarbarian]

We pay a CPA to do our taxes because my wife and I are both self-employed and work from home. That means we have to file and pay our quarterly estimated taxes in addition to our annual tax filing. We pay both halves of our FICA taxes for Social Security and Medicare, not just the one half deducted from a paycheck like a W-2 employee. That’s a lot of money, and you might not realize just how much it is until you have to write the checks yourself. And it also means that there are certain deductions that aren’t available to W-2 employees and other strategies to reduce taxable income. The CPA saves a ton of work I would despise doing on my own, and she saves us money on our taxes with some tax strategies. It’s definitely worth it.

 

[Dotini]

And they are still broke six ways from Sunday, supposedly to "help" us. I've posted before here and other places, and I keep track of it from time to time - $1 million in $1 dollar bills laid flat would reach 358' 4" tall, just a few feet short of our beloved Saturn V moon rocket. And there aren't too many of us here for which receiving $1 million dollars wouldn't be a "Shazam! Hallelujah!" moment. But in the same terms, our current national debt would go to the moon - 9 TIMES!

There is only one place to lay this responsibility - or blame for this irresponsibility: The 545 people on whom the ultimate authority rests: 1 President, 9 Supreme Court justices, and 435 Congresscritters, who love to preen and crow about all the money they bring back to their districts. This isn't about Republican/Democrat, the bad orange man or the bumbling buffoon - in one way they are distractions, Congress is supposed to be the one spending the money. If my personal income stream and debt load and expected expenditures looked like the Federal government's, I'd be in tears begging for a bankruptcy attorney. And still they hold themselves out as modern-day messiahs.

It looks as though the US may default on the debt if Congress doesn't act before June. And they are out of session and in very deep disagreement. The consequences of a default are unknown, but could be very bad, maybe even costing citizens entitlements including mortgage deductions and child tax credit.

Do you think the Fed bears some responsibility, enough for addition to the 545?

 

[jderimig]

You are correct. To be fiscally responsible, they either have to spend less or tax more, real simple.

Until we actually bill people for what the government is spending on them the people will not hold government accountable until its too late. I think that is a feature, not a bug.

 

[jderimig]

We pay a CPA to do our taxes because my wife and I are both self-employed and work from home. That means we have to file and pay our quarterly estimated taxes in addition to our annual tax filing. We pay both halves of our FICA taxes for Social Security and Medicare, not just the one half deducted from a paycheck like a W-2 employee. That’s a lot of money, and you might not realize just how much it is until you have to write the checks yourself. And it also means that there are certain deductions that aren’t available to W-2 employees and other strategies to reduce taxable income. The CPA saves a ton of work I would despise doing on my own, and she saves us money on our taxes with some tax strategies. It’s definitely worth it.

I think everyone should be forced to write an estimated tax check to the government every 3 months.

My young daughter had to start doing that as she is self employed. It was amazing on how fast that changed her political alignment.

 

[Antares JS]

You are correct. To be fiscally responsible, they either have to spend less or tax more, real simple.

The problem I usually point out to those who scream about the need to raise taxes is that confiscating and liquidating the entire net worth of Elon Musk ($174B) would fund the US government ($6.27T spending for 2022) for about 10 days, and then Elon Musk would have nothing and couldn't be taxed until he built another business.

I'm not saying it's wrong to tax the rich a bit more, but I doubt it will be the fiscal panacea people think it will be.

Realistically, balancing the budget will have to involve both tax increases and spending cuts, but I suspect that there would have to be more of the latter.

 

[jderimig]

Realistically, balancing the budget will have to involve both tax increases and spending cuts, but I suspect that there would have to be more of the latter.

Realistically balancing the budget will involve tax increases, spending cuts, and riots in the streets.