Public Service Loan Forgiveness On The Block

[miacomet]

I think you need to read the tax law again. You seem rather confused by it or haven't actually run the numbers. Maybe you're trusting some sort of propaganda-publishing source? Let's go to the mat here. You say $200K-$400K. Let's take a single employee doc with a gross income of $300K and see what he's paying in federal tax. Let's assume this doc takes the standard deduction like 90% of Americans are expected to this year. Let's assume the doc puts $40K into a tax-deferred retirement account.

In the 2017 tax code, the exemption is $4,050. That starts phasing out above an AGI of $261K, which this doc is below. The standard deduction was $6,350. So this doc had an AGI of $260K and a taxable income of $249,600. What is the federal tax due on $249,600?

Well it's $46,643.75 + 28% of the amount between $191,651 and $249,600 = $62,869

In the 2018 tax code, there is no exemption and the standard deduction is $12,000

So AGI is $260,000 and taxable income is $248,000. What is the federal tax due on $248,000?

Well, it's $45,689.50 + 35% of the amount between $200K and $248K for a total of $62,489.

Your tax bill went down $400 on the same income. Now I'm not going to argue that's a significant drop, but you're going to have a very hard time arguing that's an increase.

Mine will go up because employees can't deduct work expenses. More than compensates for $400. I also pay more than 10k in combined state and property taxes. It's not as simple as the above calculation for many of us. Most docs itemize, or at least did.

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[The White Coat Investor]

Mine will go up because employees can't deduct work expenses. More than compensates for $400. I also pay more than 10k in combined state and property taxes. It's not as simple as the above calculation for many of us. Most docs itemize, or at least did.

You might consider a different job where you're self-employed given the new deduction.

There are winners and losers in every tax law change. There is a small percentage of tax payers who had their overall tax bill go up with this change and it sounds like you're one of them. They're mostly high earners in high tax states and often single. That sentence also contains three ways to lower your tax bill - marry, move, and cut taxable income!

The NYT had a nice article with a cool chart showing what percentage of people in each income range had their taxes go up, stay the same, and go down. I can't seem to find a link to it though. If anyone knows the one I'm talking about, it's a nice chart.

Ahh...here it is and another one:

Here are the winners and losers of the new tax law

So in the $200-500K income range, >90% got a cut and less than 10% got a tax increase.

Here's the original:

How Many People In Your Income Group Would Get a Tax Cut?

It estimates 13% had their taxes increase and 86% had them decrease.

It's not that nobody got hosed, but it is inaccurate to say "most docs in the $200-400K range had their taxes increased."

 

[BoardingDoc]

I think you need to read the tax law again. You seem rather confused by it or haven't actually run the numbers. Maybe you're trusting some sort of propaganda-publishing source? Let's go to the mat here. You say $200K-$400K. Let's take a single employee doc with a gross income of $300K and see what he's paying in federal tax. Let's assume this doc takes the standard deduction like 90% of Americans are expected to this year. Let's assume the doc puts $40K into a tax-deferred retirement account.

In the 2017 tax code, the exemption is $4,050. That starts phasing out above an AGI of $261K, which this doc is below. The standard deduction was $6,350. So this doc had an AGI of $260K and a taxable income of $249,600. What is the federal tax due on $249,600?

Well it's $46,643.75 + 28% of the amount between $191,651 and $249,600 = $62,869

In the 2018 tax code, there is no exemption and the standard deduction is $12,000

So AGI is $260,000 and taxable income is $248,000. What is the federal tax due on $248,000?

Well, it's $45,689.50 + 35% of the amount between $200K and $248K for a total of $62,489.

Your tax bill went down $400 on the same income. Now I'm not going to argue that's a significant drop, but you're going to have a very hard time arguing that's an increase.

I agree with your math as presented. I had defaulted (and lost some generalizability, I'm aware) to using my home state where I pay income tax. As such, I don't think any docs here (or in your home of Utah for that matter) were taking the standard deduction last year unless they were seriously underpaid.

Your math with my contingent works out as:

AGI 260k as above
Itemized deduction solely from state income tax (lets use Utah's 5% to make it easy): 260 * .05 = 13k (this assumes they don't have a mortgage to deduct interest from as well, but whatever)
Taxable income = 247 - ~4k exemption = ~243k

Tax is 46643.75 + 28% of the amount between $191,651 and $249,600 = $61021.47

Enter 2018. State and local taxes are now capped at 10k, so again, assuming no mortgage or other deductions, we're on the standard deduction now. Your math from above is unchanged giving up a tax bill of $62489

Your bill went up by ~$1468. This number is likely going to be even higher if you were deducting mortgage interest last year as well.

Again, I'm not disagreeing with your math. I should have clarified my baseline at the beginning. Just wanted to point out the rationale for my statement.

 

[miacomet]

I agree with your math as presented. I had defaulted (and lost some generalizability, I'm aware) to using my home state where I pay income tax. As such, I don't think any docs here (or in your home of Utah for that matter) were taking the standard deduction last year unless they were seriously underpaid.

Your math with my contingent works out as:

AGI 260k as above
Itemized deduction solely from state income tax (lets use Utah's 5% to make it easy): 260 * .05 = 13k (this assumes they don't have a mortgage to deduct interest from as well, but whatever)
Taxable income = 247 - ~4k exemption = ~243k

Tax is 46643.75 + 28% of the amount between $191,651 and $249,600 = $61021.47

Enter 2018. State and local taxes are now capped at 10k, so again, assuming no mortgage or other deductions, we're on the standard deduction now. Your math from above is unchanged giving up a tax bill of $62489

Your bill went up by ~$1468. This number is likely going to be even higher if you were deducting mortgage interest last year as well.

Again, I'm not disagreeing with your math. I should have clarified my baseline at the beginning. Just wanted to point out the rationale for my statement.

Agreed. I don't get the boundless enthusiasm for this tax bill among many docs. Without knowing the precise demographics and financial details of docs around the country, it's impossible to say whether this will benefit or harm most docs, but I'm tired of hearing that only a few docs in high tax, coastal states will see their taxes go up. This is simply not true. Taxes will go up for many employed docs, many single docs, divorced docs (especially those paying alimony- what a bite), empty nester docs etc. I don't know if the folks touting this plan as doc-friendly have a political agenda or are simply unaware of the life circumstances of many other physicians, but it's getting old.

Thank you for your math. For me, I have had to cut down to part time and will be picking up telehealth and/or locums in order to take my considerable work expenses as a tax deduction.

I'm happy that the tax plan is benefitting some, maybe many, hard-working docs, but the generalizations are just that, not the truth.

 

[Birdstrike]

Agreed. I don't get the boundless enthusiasm for this tax bill among many docs. Without knowing the precise demographics and financial details of docs around the country, it's impossible to say whether this will benefit or harm most docs, but I'm tired of hearing that only a few docs in high tax, coastal states will see their taxes go up. This is simply not true. Taxes will go up for many employed docs, many single docs, divorced docs (especially those paying alimony- what a bite), empty nester docs etc. I don't know if the folks touting this plan as doc-friendly have a political agenda or are simply unaware of the life circumstances of many other physicians, but it's getting old.

Thank you for your math. For me, I have had to cut down to part time and will be picking up telehealth and/or locums in order to take my considerable work expenses as a tax deduction.

I'm happy that the tax plan is benefitting some, maybe many, hard-working docs, but the generalizations are just that, not the truth.

Find out if your taxes go down, or not:

Tax Plan Calculator by Maxim Lott

 

[The White Coat Investor]

Agreed. I don't get the boundless enthusiasm for this tax bill among many docs. Without knowing the precise demographics and financial details of docs around the country, it's impossible to say whether this will benefit or harm most docs, but I'm tired of hearing that only a few docs in high tax, coastal states will see their taxes go up. This is simply not true. Taxes will go up for many employed docs, many single docs, divorced docs (especially those paying alimony- what a bite), empty nester docs etc. I don't know if the folks touting this plan as doc-friendly have a political agenda or are simply unaware of the life circumstances of many other physicians, but it's getting old.

Thank you for your math. For me, I have had to cut down to part time and will be picking up telehealth and/or locums in order to take my considerable work expenses as a tax deduction.

I'm happy that the tax plan is benefitting some, maybe many, hard-working docs, but the generalizations are just that, not the truth.

How are they not the truth? You're citing anecdotes where the data shows the vast majority are seeing their taxes go down. Even if we assumed that taxes went up for ALL single docs, that's only 15% of men and 29% of women physicians. A distinct minority.

Profiles in Happiness: Which Physicians Enjoy Life Most?

Can I concoct a scenario where taxes would go up? Sure. (It would involve a single, childless doc in a high tax state in a narrow band of income like your anecdotes.) But the plural of anecdote is not data. As high income professionals, we had one bad thing happen to us- the SALT limitation. In return, we got a lot of good things- lower tax brackets (a married doc with a taxable income of $600K and a single doc with a taxable income of $500K is in the 35% bracket now, not the 39.6% bracket where that bracket used to start at $418K and $470K respectively), a higher standard deduction for those who take it, the Sec. 199A deduction, less of a marriage penalty, the child tax credit phaseout went up high enough that many docs will still get it ($110K to $400K), the Pease phaseouts are more limited etc.

One bad thing. Yes, it sucks. I'll lose a $75K deduction. But it's worth it for most. I'm sorry you guys got hosed on the tax law changes. But just because you did don't extrapolate that to "most docs." Imagine if you're in Texas or Nevada or Florida or Washington or Alaska? You didn't get anything bad out of it! That's a lot of docs.

 

[miacomet]

How are they not the truth? You're citing anecdotes where the data shows the vast majority are seeing their taxes go down. Even if we assumed that taxes went up for ALL single docs, that's only 15% of men and 29% of women physicians. A distinct minority.

Profiles in Happiness: Which Physicians Enjoy Life Most?

Can I concoct a scenario where taxes would go up? Sure. (It would involve a single, childless doc in a high tax state in a narrow band of income like your anecdotes.) But the plural of anecdote is not data. As high income professionals, we had one bad thing happen to us- the SALT limitation. In return, we got a lot of good things- lower tax brackets (a married doc with a taxable income of $600K and a single doc with a taxable income of $500K is in the 35% bracket now, not the 39.6% bracket where that bracket used to start at $418K and $470K respectively), a higher standard deduction for those who take it, the Sec. 199A deduction, less of a marriage penalty, the child tax credit phaseout went up high enough that many docs will still get it ($110K to $400K), the Pease phaseouts are more limited etc.

One bad thing. Yes, it sucks. I'll lose a $75K deduction. But it's worth it for most. I'm sorry you guys got hosed on the tax law changes. But just because you did don't extrapolate that to "most docs." Imagine if you're in Texas or Nevada or Florida or Washington or Alaska? You didn't get anything bad out of it! That's a lot of docs.

This is all true. And most docs may well benefit. But of the 951,061 licensed docs in the US, 279,966 (over 29%) live in NY, CT, RI, DC, MA, NJ, and CA. Another 75,000 more live in IL, MD, and OR. That's a third of the physicians practicing in the US!! And even within the states where many docs could benefit, many still will not unless they are married, have a ton of kids, don't itemize etc. The majority may benefit, but well over one third won't. To me that's too significant a minority to paint the tax bill in as rosy a light as many have people have been.

 

[miacomet]

Find out if your taxes go down, or not:

Tax Plan Calculator by Maxim Lott

Not! And I don't live in a coastal state.

 

[The White Coat Investor]

Not! And I don't live in a coastal state.

It's an interesting calculator, but it's way too simplistic. It says mine will go down by $30K. They'll drop by far more than that. It didn't even ask my employment status.