I am aware of the "hidden" IRS rate changes, imbedded in the tax tables. For an example, I might think I have $5,000 in itemized deductions, then tthe Tax Tables dramatically reduce that deduction's value, ergo a hidden tax increase.
Is there a site, where one can see these hidden taxes quantified, to be used in tax planning?
as just posted in another thread, here is a tax planning spreadsheet that helps:
This spreadsheet just calculates, it does not explain the tax laws, including the stealth taxes you speak of. There are other sites for that, and I assume you will have a reply with some links soon.
Are you talking about the various phase-outs that Congress has implemented into the tax code over the years, along with all the other complexity? That is not an "IRS rate change", hidden or otherwise.
What kind of planning are you talking about? The vast majority of taxpayers are not affected by phase-outs, only the relatively high-income folks. Granted, one may be in the high-income category in only a single year out of many, just as one may win the lottery only once in a single year out of many.
If you can arrange your income and deductions to avoid phase-outs, then do so. All you need for this is to know the point at which the phase-outs start, which is well-documented at the IRS web site. Most people don't have that much control, at best they can simply shift a phase-out from one year to the very next. If you only have a choice between income with tax, vs. no income, why wouldn't you always chose the former? In which case, what planning is involved?
To your last question, I recently bought a professional-oriented book (by Kaye Thomas, known to some here as founder of fairmark.com investment & tax web site) that has some great explanations and charts of how AMT and regular tax marginal rates, effective rates, and phase-outs of same interact. The information is valuable to me which is why I paid $95. How much are you willing to pay?
The lower income taxpayers face phase outs as well. The EITC phases out. The low tax rates on dividends phase out. All sorts of credits phase out.
where? I have not seen a concise list on the IRS website - these phase outs are all over the place.
Most
People can often shift income or expenses deductions. They can avoid overtime. They can pay their property taxes a bit early or late. Knowing all the phase outs would help in their planning.
If you only have a choice
Is this a straw argument? Are there not phase outs that, for a given income change, send the marginal rate over 100%? Or very high?
what is the title of this book?
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The only way I could see that is if credits are involved. Somehow this part of the discussion always leads me to the conclusion that every credit I don't receive must be a tax increase for me, because after all, someone else got the credit and I didn't. Looked at that way, my tax rate is probably thousands of percent of my income.
We do already see a more-than-100% marginal rate where the tax tables use $50 income increments, so when one extra dollar of income puts you one line further down in the table, I guess that's a huge marginal rate on that one dollar -- but in the big picture, it's negligible.
I agree that in certain very specific (and IMO rare) situations a shift of income or deduction might lower an overall tax rate, but I find that usually over a two-year period it's still going to average out about the same.
We have a progressive tax system, and the fact is higher incomes are intended to pay higher marginal rates. I'd be in favor of reducing or eliminating many non-business deductions, thereby reducing "tricky" deduction phaseouts, and just make the tax rate brackets themselves more progressive (at both ends), at least then the rates wouldn't be as "hidden".
But then, folks in forums like this wouldn't be able to keep themselves busy trying to game the system and win a slight edge over someone else.
Title is "Equity Compensation Strategies" which focuses primarily on employer stock transactions. However, in order to discuss ISOs, there is a full chapter devoted to the explanation of AMT vs. regular tax marginal and effective rates. There is also the first explanation I've read and understood of why and how the minimum tax credit works. I've only just received the book so have not read it all yet, but I already found that one chapter enlightening. A small price discount can be found on Amazon when you click from fairmark.com.
Back to the original question, "is there a site", I'd suggest purchasing a professional desk quick reference, such as TheTaxBook or QuickFinder. Typically they have a some pages in tabular format that cover current year threshold and phase-out amounts for many common credits and deductions. However, you would still have to jump around to other chapters to pick up other details, but at least it's all in one book. At the IRS site, you would have to jump around to different pubs.
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