The tax bill

What’s wrong with this picture?

That house will cost the couple about $3804 a month assuming 5% (very low) down payment, 30 years at 4% but excluding any insurance or PMI costs.

Using several online estimators; to afford that mortgage and property taxes the couple would have to earn at least $175000 a year assuming all other monthly credit payments are only $600 including a car payment and yet we are told by the example below that their federal tax bill is only $608

Who would have thunk it❓A couple earning three times the national household median pays only $608 in federal taxes … largely because the tax code is skewed in their favor and only because they bought a home, live in a high tax state and have a child. Taxpayers even subsidize their “very low” down payment.

And here we thought only the wealthy benefited from tax “loopholes.”

I wonder what the tax bill would be for a childless couple with the same income that rents or a senior couple living in Delaware who have paid off their mortgage?

Married with children, in New Jersey

But in slightly different circumstances, that couple could make out much worse. Let’s assume Maya and John are homeowners. Some years ago, after living frugally and with some help from generous parents, they were able to buy a $600,000 house in New Jersey. Because they are so thrifty and have excellent credit, they qualified for a very low down payment.

However, because they live in New Jersey, they pay some of the nation’s highest property taxes. Let’s also assume that instead of two children, they have one, with the plans to have a second when their finances allow it.

Under current tax law, the couple can deduct their state, local and property taxes, as well as the substantial interest they pay on their mortgage, bringing their taxable income to the lowest tax bracket. After accounting for the child tax credit, they would owe just $608 to the federal government in income tax.

Under the Senate plan, Maya and John would still be able to deduct the full value of the mortgage interest they pay. (The House plan limits that deduction to the first $500,000 of the mortgage). But they couldn’t take off any of their property taxes, which removes $13,000 from their taxable income under current law. They could save slightly more by taking the increased standard deduction ($24,000 under the Senate plan) than they would by itemizing.

But still, they would pay $2,624 in federal income taxes, even with the increased credit for their one child — $2,000 more than they do currently.

Source: Analysis by NYTs via

Categories: Government, Observations on life

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4 replies »

  1. Calling this tax reform is laughable. True tax reform should:
    1-match revenue with spending.
    2-Simplify tax reporting
    3-eliminate loopholes and preferences.
    Whatever comes out of reconciliation won’t do any of these things. On the individual side, some deductions might go away pushing more people towards the standard deduction which might be called simplification but on the corporate/ business side, tax attorneys and accountants should have no fear about their future employment prospects. The house version looks a lot like the ACA bill with the goodies up front and the burdens to follow with the sun setting provisions. Anyway it will be interesting to see the news stories about who will be the losers and who will be the winners once the horse trading gets going. One thing for sure though is that tax reform is never permanent. Like they say,” only two things are certain in life, death and taxes, but death doesn’t get any worse every time congress convenes. “


  2. Depending on the many variables, some people will benefit while other people will lose.

    What makes me irate is the House overtly going out of its way to hurt seniors.

    I’m a low income single senior.

    The House bill would raise my taxes because it eliminates the extra over age 65 deduction and raises the lowest tax rate to 12%. The House bill also eliminates medical deductions [that hurts the elderly.]

    The Senate bill keeps the extra over 65 deduction and keeps the lowest tax rate at 10% so it actually helps me by increasing my tax exempt amount. The Senate bill actually improves the medical deduction [that benefits the elderly.]

    God knows what the final bill will be like. We’ll see if they throw old people under the bus.


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