New Tax Law

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Just wondering when MaxiFi Planner and ESPlanner will include updates for the TCJA. I'm working with a client who is a "Specialized Trade or Business" and need to see the impact of the 20% pass-through deduction (among other things). The tax differences under TCJA could be significant.

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dan royer's picture

We have it all ready to do on our development server. Making a few little usability tweaks. We have a setting that allows you to compare our current law--i.e., the 2017 law--with the new changes. There's also an option about whether the changes remain permanent.

For me, the new law increased my discretionary spending $235 per year. :) Not much different for me. If the law is made permanent, it's 840 / year more for me. FWIW.

Thanks Dan. I look forward to the update. The side calculation I did for one of my clients showed about an $8,500 tax savings in 2018 alone under the new tax law, which goes right to the household's bottom line cash flow. The large savings is due to the fact that the client is self-employed, so he benefits from the 20% pass-through profit deduction.

I know the 20% pass-through profit deduction calculation is complicated, and depends on whether the profit from an S-corp, LLC, or sole proprietorship is from a "Specialized Service Business" or not. And for high income earners NOT in a "Specialized Service Business", the deduction is limited to 50% of W2 wages paid by the business. So I can imagine that incorporating all of this into the software must be complicated.

dan royer's picture

the update might be available on Sunday morning.

Dan,
What's the status on releasing the next update?
Thanks
James

Dan,
What's the status on releasing the next update?
Thanks
James

dan royer's picture

They are still working on some of the pass through deductions. My guess is a couple of more days or next weekend.

Richard and James,
The tax updates were done this weekend for MaxiFi, so I take this as another nail in the coffin of ESPlanner. At very least it is playing second fiddle.

https://maxifiplanner.com/release-notes
MaxiFi Planner now incorporates changes brought about by the new tax law, known as the Tax Cuts and Jobs Act of 2017 (TCJA).

I'm incredibly frustrated that I can't do year-end updates for my clients as of Jan 31, it never occurred to me that that date would not be solid for making promises. I've spent time with many but don't want to provide any reports and have to explain this is $1K off, that's $2K off, I'll update it later.

I'm starting my research on MaxiFi finally!, wish there was a trial run period to do that.

Stephen

dan royer's picture

The new update is posted now, but Chris found a bug in file/copy profile that needs to be fixed.

Dan, Thanks for the update. I have a question on the "Economic Assumptions/taxes/federal tax policy" entry. What's the difference between the "Current Tax Law" and the "TCJA Made Permanent" selections? When I ran the identical profile for each of my results show identical federal and state taxes BUT my discretionary spending increase about 1%. I can't find any reason for this difference. Even thought 1% is insignificant I'd like to understand it. Since both "Federal Tax Policy" selections result in identical taxes maybe the change in discretionary spending - the only results that changed - points to a error in calculations.
Thanks,
James

dan royer's picture

The current tax law is designed to expire in 7? years or maybe it's 8. Anyway, it's designed to expire so the "current tax law" setting assumes that. The "made permanent" is an option to model that this law will ultimately be made permanent--this is a political issue and many, including Kotlikoff, feel this law will be made permanent. Leaving it as "current law" is more conservative to your model.

Thanks Dan,
With "current tax law" selected, taxes increased after Dec 31 2025. That explains the slight differences in spending that I was seeing.
There is another question concerning the amount ESPlanner is showing for deductions on the Federal Taxes-Joint Filer page. With TCJA the standard deduction is $24,000. But for 2018, Planner is showing $26,600. Could you please explain the additional $2,600 deduction. My tax deductible expenses for 2018 using the "tax law prior to TCJA" are less than $19,000 not including exemptions. So the program appears to be using the standard deduction.
Thanks
James

Found the answer to my question concerning the $26,600 federal tax deduction.
The TCJA keeps the "additional standard deduction" of $1300 per person for those blind or over 65. A hold over from the pre TCJA tax law.
James