Mainecat Posted April 25, 2017 Share Posted April 25, 2017 And here is how they want to fund the corporate cut and I just as I thought the middle class takes the hit..... Is Trump about to change your 401(k)'s biggest tax break? Dan Caplinger, The Motley Fool Published 1:04 p.m. ET April 24, 2017 | Updated 21 hours ago President Donald Trump was elected, in part, because of his championing of income tax reform, with promises of a simplified structure of tax rates for individuals and lower tax rates on corporations. Yet at no time during the campaign did the president signal that the way his administration would pay for those moves would involve taking away one of the most popular and widely used tax breaks in the income tax system. Now, though, lawmakers are reportedly looking at removing the upfront tax deduction for traditional 401(k) contributions, and some proposals have even suggested taking away part of the tax deferral that 401(k) plans provide. With most Americans already saving an inadequate amount toward their retirement, changes to the rules would only take away a key incentive for setting money aside for the future and punish those who prudently plan for their retirement. How Congress might change your 401(k) One big problem involved in corporate tax reform is that it would be costly. Cutting tax rates from 35% to 15% would result in a drop in revenue, and many lawmakers want to ensure that any tax reform legislation is revenue-neutral. To achieve that, Congress would have to couple tax cuts with ways of raising revenue. One of the largest tax benefits Americans get comes from the exclusion from income of money that they save in 401(k) plans. According to the latest report from the Joint Committee on Taxation, the exclusion of contributions to and earnings of defined contribution plans cost the federal government more than $90 billion in potential tax revenue in 2016. Estimates have that number rising to $146 billion by 2020, and the total over the five-year period from 2016 to 2020 is almost $584 billion. The key proposal Congress is reportedly looking at treats all 401(k) contributions as if they were Roth contributions. That would take away upfront tax benefits in exchange for making earnings and appreciation tax-free going forward. By doing so, the federal government believes it could raise $1.5 trillion in additional tax revenue over the next decade, providing an ample source of funding for tax cuts elsewhere. An even bigger threat could come from measures to change the tax-deferred nature of 401(k)s. Right now, any income and gains your 401(k) generates don't get taxed until you make withdrawals. But one proposal would impose a 15% tax on annual gains within 401(k) plans. For long-term stock investors, that could put 401(k) plans at a disadvantage to simple taxable accounts, where one can defer capital gains tax simply by not selling shares. Proponents of the measure suggest that the move would raise between $48 billion and $60 billion in annual tax revenue between 2018 and 2025. Why would President Trump raise taxes? After all the talk of tax cuts during the campaign, it seems like a complete about-face to be talking about tax increases. However, the justification some lawmakers have come up with involves the potential impact on investment values that could come from corporate tax reform. As the argument goes, if taxes on corporate income go down, then there would be an immediate increase in after-tax earnings, which in turn should produce a rise in share prices. For the government to impose a tax on that share-price increase is, in effect, a way to balance out the tax-created bump. However, the fact that Republican lawmakers are even contemplating such measures comes as a shock to those who have followed the political pendulum swing over time. For years, it has been Democrats who have looked at 401(k)s as a source of tax inequity, and Democratic presidential candidate Hillary Clinton suggested reducing the value of tax deductions for high-income earners on their 401(k) contributions. Budgets from former President Barack Obama included provisions that would have limited 401(k) savings for the wealthy, and some policymakers have even suggested that 401(k)s should be abolished entirely. In that light, for attacks on 401(k)s to come from the other side of the aisle shows how the world in Washington has once again turned upside down. Still, the key question is how much of President Trump's base of loyal supporters truly cares about 401(k) tax breaks. For those who face unemployment and economic hardship, huge deductions for retirement savings are just one more sign of how income inequality can compound because of tax policy. If you have modest incomes and pay low tax rates, then a Roth-style 401(k) is often a better option over the long run -- as long as Roth accounts remain truly tax-free and don't also end up on the chopping block in Congress' search for revenue. What to do? You can expect more details on President Trump's tax plan this week, but it's not too soon to let your lawmakers know that 401(k) deductions are an important component of your retirement savings strategy. Changing the rules on retirement savers when it's too late for them to adjust accordingly is unfair, no matter which side of the aisle is behind such a measure, and urging lawmakers to respect past planning is essential in order to keep America's retirement savings problem from getting even worse. https://www.usatoday.com/story/money/personalfinance/retirement/2017/04/24/is-donald-trump-about-to-take-away-your-401ks-biggest-tax-break/100837046/ Quote Link to comment Share on other sites More sharing options...
Anler Posted April 25, 2017 Share Posted April 25, 2017 I dont think I would be opposed to that. I have both a traditional IRA and a Roth right now. If they will allow larger contributions to the Roth I think that would work out great. Unless they change it again after I retire then I will be pissed! Quote Link to comment Share on other sites More sharing options...
Platinum Contributing Member Highmark Posted April 25, 2017 Platinum Contributing Member Share Posted April 25, 2017 1 minute ago, Anler said: I dont think I would be opposed to that. I have both a traditional IRA and a Roth right now. If they will allow larger contributions to the Roth I think that would work out great. Unless they change it again after I retire then I will be pissed! Its completely retarded that there are caps on Roth IRA's now. What's really stupid is there are legal ways around them. https://www.fool.com/retirement/iras/2014/05/25/how-to-get-around-the-roth-ira-income-limits.aspx Quote Link to comment Share on other sites More sharing options...
Anler Posted April 25, 2017 Share Posted April 25, 2017 4 minutes ago, Highmark said: Its completely retarded that there are caps on Roth IRA's now. What's really stupid is there are legal ways around them. https://www.fool.com/retirement/iras/2014/05/25/how-to-get-around-the-roth-ira-income-limits.aspx Interesting. We have several accounts now between my wife and i and just last year hired a wealth management person to streamline our investments. He was really pushing the Roths so we opened them last year. He also mentioned about converting our existing plans to Roth but said it was a little tricky. I will touch back on it this year when I meet with him. My wife has a small fortune in her 401k from her years working, not sure the short term tax liability would be worth it tho... Quote Link to comment Share on other sites More sharing options...
Snoslinger Posted April 25, 2017 Share Posted April 25, 2017 next will be no more mortgage interest deductions... Quote Link to comment Share on other sites More sharing options...
Zambroski Posted April 25, 2017 Share Posted April 25, 2017 MC: "Middle class takes the hit." "Middle class pays the price>" "Middle class on the losing end." "Middle class is gonna pay for it." "Middle class is not going to benefit." Jesus you retard. Come up with some new and more creative "scare" lines. You are pathetic. Quote Link to comment Share on other sites More sharing options...
Anler Posted April 25, 2017 Share Posted April 25, 2017 8 minutes ago, Snoslinger said: next will be no more mortgage interest deductions... I would be fine with zero deductions and a sensible tax program. However that would eliminate the need for alot of accountants and tax preparation companies as everyone could do their own taxes on a single form. Quote Link to comment Share on other sites More sharing options...
Mainecat Posted April 25, 2017 Author Share Posted April 25, 2017 and real estate tax deductions. Just give the corps the breaks.....yeah....yaeh Quote Link to comment Share on other sites More sharing options...
Mainecat Posted April 25, 2017 Author Share Posted April 25, 2017 LMAO this is how it works... Quote Link to comment Share on other sites More sharing options...
Ez ryder Posted April 26, 2017 Share Posted April 26, 2017 I am fine with all u posted . same as a Roth. I am also ok with mortgage deduction reduced or eliminated . it will incentivize people to not do stupid money wasting 30 yr mortgages and spend more on a home than they can afford Quote Link to comment Share on other sites More sharing options...
Sleepr2 Posted April 26, 2017 Share Posted April 26, 2017 4 hours ago, Mainecat said: LMAO this is how it works... Well, you do seem to,be as arrogant, and stupid as Cartman, Quote Link to comment Share on other sites More sharing options...
Snoslinger Posted April 26, 2017 Share Posted April 26, 2017 27 minutes ago, Ez ryder said: I am fine with all u posted . same as a Roth. I am also ok with mortgage deduction reduced or eliminated . it will incentivize people to not do stupid money wasting 30 yr mortgages and spend more on a home than they can afford yep, right up until a dem suggested it. Quote Link to comment Share on other sites More sharing options...
Ez ryder Posted April 26, 2017 Share Posted April 26, 2017 nop always ok with both of them I don't care who put it on the table . if it brings other tax rates down I am fine with cutting all non operational deductions Quote Link to comment Share on other sites More sharing options...
Im4snow Posted April 26, 2017 Share Posted April 26, 2017 We've had insufficient savings forever......the current tax deferral of income saved for retirement is a huge benefit to the county. I can't imagine they'd wanna reduce the incentives for people to save. Would be a major non-starter in congress imo. Quote Link to comment Share on other sites More sharing options...
Edmo Posted April 26, 2017 Share Posted April 26, 2017 21 minutes ago, Im4snow said: We've had insufficient savings forever......the current tax deferral of income saved for retirement is a huge benefit to the county. I can't imagine they'd wanna reduce the incentives for people to save. Would be a major non-starter in congress imo. Just like when Obama wanted to go after the kids 529 plans. It blew up in his face. You can't change the plan after it starts, you're just fucking over those who chose to do the right thing. Quote Link to comment Share on other sites More sharing options...
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