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For better or worse, it is here and is law. Has anyone else here started to play with calculators and/or apply the new rules to last year’s taxes to see where you stand?
Me personally, I have 4 kids so the doubled child tax credit is HUGE for me. I will effectively not be paying any federal tax for the foreseeable future. I feel like I can freely expand my ebay business without worrying about a nasty tax bill surprise in April 2019.
I’m curious how this plays out for some of you folks on here who are self-employed full time.
As stated in the title, please keep this to talking about the effects on your personal tax situation and your plans moving forward and no politics please!
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I’m not full-time and it’s difficult to address this post without getting political. A good portion of my part-time income on Ebay will now go to our tax increase unless the constitutional challenge by the blue high tax states is successful and swift. We just had to rush out and pay our second property tax installment with an extra credit card fee because (of course) our county assessor is closed for the entire holiday week. In the past, my Ebay profits have been allocated to my kids’ expenses like clothes, classes and my son’s tuition. Because out here, you’ve got your house and that’s basically what you have. A basic house on a really, really expensive area of dirt. I just keep reminding myself that we went to the beach on Christmas. That’s why the dirt is so expensive.
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Personally, I’d love a factual breakdown on how the taxes are going to impact people. I’ve heard so many rumors and conflicting articles of advice on what best to do, it’s all very confusing. According to Elite Daily “…the reality is that the more-than-500 page law is so complex that there’s no hard and fast rule for how your taxes will change.”
On the positive side, most sites agree that businesses will do well in this new tax.
According to one articleIt raises the standard deduction to 20 percent for pass-through businesses. This deduction ends after 2025. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S corporations. They also include real estate companies, hedge funds, and private equity funds. The deductions phase out for service professionals once their income reaches $157,500 for singles and $315,000 for joint filers. Small business owners should delay any income they can until 2018 to maximize that deduction.
https://www.thebalance.com/trump-s-tax-plan-how-it-affects-you-4113968
A lot of businesses will open an S-Corp to take advantage of the new tax regs. I don’t think it’s necessary yet, though. We have until 2025 before the pass-through rates drop. However, I was listening to a tax specialist of eBay radio and he was saying that we need to really pay attention to allowable business deductions. Sounds like a plan, to me. My only problem is turning my home business into a deductible business. My entire home is shared with the business, with supplies, cleaning, storage, death piles, paperwork and computer all shared in different rooms with my personal life. It will be a major PITA and expense, right now, to change that. But perhaps I can do it over the course of several months and make it happen.
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There’s plenty of good summaries available. Most of them have a fair amount of spin one way or the other.Just google “new tax plan details”.
Just remember this: Business related deductions were NOT affected by the law. There was ALOT of mis-information floating around the last two months that business related deductions would be removed. That is not true.
What was removed was unreimbursed employee work related expenses. So if you are a regular employee of a company and you maintain an office at home then you can no longer itemize that office. That loss is mostly offset with the increased standard deduction and 3% lower tax rate. Side note: I have known many people who exploited the home “office” over the years to allow them to itemize. If you own your business as a sole proprietor, LLC, etc, then you are good to go with all the normal deductions such as home office, mileage, etc.
I live in a state with low property taxes, so the $10k limit doesn’t even come close to affecting me. Even before the standard deduction rate hike it was nearly impossible to have enough deductions here to itemize. The only year I was able to itemize was a year we were paying on two mortgages. Even then I barely beat the standard to the point it really wasn’t worth the effort.
For people like Christine though, this could potentially hurt. Christine, I don’t know what your exact situation is but have you already went over your actual numbers with an accountant to estimate your tax increase? I’d be curious to see a real world, non-cherry picked example of someone in our shoes who sees a tax increase if you could share some of that anaylsis.
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I have a tax background and do our taxes. There is no question we will pay more, but I will have to play around with the software early this year to try to estimate how much so we can adjust my husband’s withholdings and/or figure out my quarterlies. Maybe this can be my goal to step up efficient processing on Ebay. 🙂
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Finally did our estimated taxes and the software allows you to make adjustments under the new tax law. Looks like we will take a hit, but it’s not as bad as I feared at first. We’ll be paying an estimated $4k in additional federal taxes. We will now pay federal taxes on all of the money we pay to the State of California in taxes. It would have been much more but the child tax credit is higher and luckily for us, the phase out is way more generous. Retro here you go with a real world example of someone losing under the new law. I hear the regime is going to try to go back for another bite at the apple (capital gains rate + permanency). I’m sweating already…
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Thanks for the sharing your numbers. I’m sorry that you are paying more in taxes. Hopefully your state leadership can figure out some form of solution to help people in your situation.
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Amatino, I have always used my home, garage for my business(sole proprietorship) and I always have been able to deduct usage, utilities and repairs for my business/home. Once you fill out the form for using your home for a business it is relatively easy to just deduct a % of everything for business. For me its “technically” 27% of my home. That’s what I deduct but in realty its way more, but it would raise a huge red flag if I tried to deduct more than that. I say that while I sit at my computer with a pile of listed, ready for storage to my left and a huge pile of needs to be photographed and measured on my right plus all of the stuff in storage in my “ebay room” upstairs and the totes full in the photo room. I know, I’m really lucky I have a good size house with just the two of us. It seems that my whole house is an ebay store, but I am slowly working on that, really. Just a little bit too slow at the time. But when someone is sick there are more important things than ebay.
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I have no children and don’t pay Federal Taxes because I make a part time income, so I will not be getting anything other than a small boost to my personal deduction, clearly I get no break from payroll taxes which I alone pay in full, what might affect me however is the destabilization of the health insurance market by overturning the individual mandate (tacked onto this tax bill), as a cancer survivor I am uninsurable basically and need my ACA policy…sigh..winners will be those in Red States with low taxes, losers are the Big Blue states where property taxes are high, other losers may be charities because the law changes the write offs for charitable deductions. I personally think that Americans will get a rude awakening in a few years when taxes go back up for most people (the tax cuts are going to expire–they couldn’t make them permanent under Congressional rules because the enormous cost of the cuts, nearly 2 Trillion dollars–which will need to be paid for eventually (with cuts to medicaid/medicare/social security, which Paul Ryan has already broached–this is not political spin BTW, just the facts.)
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Annabel52, is your garage dedicated solely to the eBay business, nothing else? If not, how do you get around this:
If the exclusive use requirement applies, you can’t deduct business expenses for any part of your home that you use both for personal and business purposes.
https://www.irs.gov/taxtopics/tc509
That’s the part of the Tax Code that gets me. Our garage is half mine, half the hub’s, and we have the laundry in there too. My desk/computer is in our living room, and I have Death Pile items in almost every room in the house!
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Exclusive use does not apply to inventory storage. So if you use half the garage as inventory storage you can count that square footage – just the storage footage, not the whole room. The same goes for closets and storage buildings. Another option is putting up a wall to separate the garage. And hey, that wall will be tax deductible too because it is for your business.
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Amatino, I don’t use the entire garage. It’s a 1 1/2 story, 2 car garage with a lot of storage upstairs. I only claim 27% of it as ebay space. That would only be a small portion of the upstairs but I do have totes stored on one side against the wall of finished hand painted craft items waiting to be listed. I have done craft shows in the past and plan on listing the contents at some point. I measured the sq footage of my house and the upstairs of the garage and estimated that I use 27% of the total space. (Not where cars are parked or where I have personal items stored.) I took my largest work area in my home and used that as the basis for my home usage and added the garage space.I use the same $$ amounts until my property gets reassessed and then I have to adjust the figures, still using the 27% as the total amount of used space. The % won’t change from year to year, just the value of the property.
My point is to not overestimate your % of space that you use for ebay. J&R can use their entire new storage building as a deduction since it is a dedicated space for ebay.All of us who use our home as our business probably use more than we claim. Just be reasonable. If I tried to claim more than I do I feel like a tax audit would be in my future every year. Not something I want to happen. -
Oh Amatino, I do my own taxes and have for 40 years. I have been audited once and that was a question of income tax that I didn’t pay in Florida. I live in NC and was working outside my home in NC at the time and have never worked in Florida. I wrote to the IRS and explained that I could not work in Florida and NC on the same days in question and they closed the audit without me having to do anything else. My theory was that a SS# was entered incorrectly. Must have made sense because I never heard anything else. But I was sweating when I got the letter in the mail!!!
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The long term affect on an increase in home ownership (less tax write offs) is a decrease in prices (home values). It is similar to an interest rate increase.
Hopefully I’m overstating this, but I know a lot of people directly affected by this.
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Home values, or appreciation at least, may be affected for a bit but I fully expect that we will see tax changes again in the next few years. There could also be a disruption in the markets and values due to politics and foreign policy. All of this uncertainty is certainly less than ideal am I’m grateful we are not looking to sell right now. My poor next door neighbor (Bay Area transplant) just closed escrow last month.
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I’m a lib but as a new business owner I have to say I’m thrilled at the tax changes which seem heavily weighted in favor of businesses. The pass through thing is going to help (I think, never filed as a business before) as is the doubling of the standard deduction. The thing I’m confused about is the ACA mandate. I thought it was going away and that the tax penalty I just paid was the last? I’ve read it is but then read one article last night about how we still have to pay it next year. Every single article I’ve read is just a highlight of things that whichever side is mad about. If you’re not making enough to hire an accountant then you’ll never know all the details. I just paid my local B&O tax and was surprised at how little it is. I kind of get a weird sense of pride for supporting my community and I feel like I’m one of the local bigwigs in nice suits. Totally confused with my state tax website right now as I can’t even figure out HOW to pay. 🙁
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Here is one to watch out for.. Georgia’s New Retail Sales Tax for Online Seller’s. This may set a precedent that rolls over to other states. But as it stands now and if it passes the Senate, [I think today], then Online Sellers will have to collect and pay Sales Tax on items sold to customers in Georgia when they live and operate from other states.
The catch is in the two numbers they use. The first says if you sell $250,000 to Georgia residents, but the other number of interest says OR 200 ITEMS sold to residents of Georgia. If we are reading all of this correctly if you live and operate your online business and sell online and sell 200 items or more to buyers who live in Georgia, then the Georgia dept. of Revenue wants you to collect Sales tax and send it to GA. even if you don’t have a physical office, warehouse or store within the state.
In the past we only collected state sales tax for buyers who lived within the state where we lived and operated. So no big deal for us. But what about all of you guys? Have any of you sold more than 200 items to Georgia residents? I would think that some of you guys who have thousands of items in your stores and sell a high volume of items, may possibly have accumulated over 200 items sold to residents of GA. Don’t know?
We signed a petition several times over the last year about this and Ebay sent us a bolier plate letter to sign. We got answers from all of our state representatives and they said they were watching the situation closely, whatever that meant.
The word is, if this passes in Georgia, then a domino effect might start to happen on the state level in other states. The GA representatives also say they are just echoing what they are seeing and hearing at the National level.
But in any case we really hope we are not understanding this and the implications, so any comments would be interesting. Here is the link….
the team Michael, Susan, Lisa at MDC Galleries and Fine Art in Atlanta
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Any time corporations want to screw their employees, they use this corporate speak phrase:
“In an effort to align with industry standards….”That is code for “we’re screwing you”.
Sounds like legistators are going to do the same thing.
There has been a national sales tax issue being kicked around for a while and I had a conversation with Senator Joe Manchin about the national sales tax bill a few years back. I explained how unfairly cumbersome collecting sales tax for every single state would be to independent small time sales people such as ebay sellers. His response in a nutshell: everybody needs to pay their fair share – tough luck.
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Hey Retreo.. One of the benefits of using WonderLister or SixBit is all T-Satt or we have to do is click on all states that has this law and the tax for that state will be charged and the collecting tax part is done automatically and we can generate a financial report for whatever period we want, monthly, quarterly, annually, etc. and just pay the total amount shown.
I also believe Ebay also already has a list of all the states and all a seller that uses Ebay listing will have to do is set all the states that has the law and Ebay will charge customers accordingly and properly give a report also.
Until it becomes a Federal law I doubt if Ebay will collect the charges and pay for us. We will just have to pay per state, like the “in state” sales works now. For example if 16 states do this, then I would guess write sixteen checks and send out. But the funds will already be in our paypal account because Ebay will add it to every state we have checked off to collect it for.
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I certainly have too small of a store to sell more than 200 items to any one state in a year.
If you didn’t sell 200 items to Georgia in one year, but you grew your store, and you didn’t know that you would sell 200 items the next year, then you wouldn’t have been collecting sales tax from the begining. That doesn’t seem right to me. Either we have to submit sales tax or we don’t.
If we needed to submit sales tax to states that we don’t live in, then that law should come from the federal government, not the state. How can a state impose laws on someone outside of their state? If we have to submit sales tax to other states, OK, but do it through federal law.
BTW, Mike, the team seems to be growing at MDC Galleries and Fine Art! Before I thought it was just you and your wife.
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It seems to me that the states will find a more reliable way to get their sales taxes, but it will have to be done in a comprehensive manner that does not result in impossible bookkeeping for sellers. Really it makes more sense for the platform to collect and disburse. We are definitely not there yet.
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The petition we signed was to try to get our representatives to drop this issue altogether. It is on the news [radio as we are working today]. The bill passed the House of Reps. some weeks ago. It is up for Senate vote shortly. Wondering if it will make National News tonight?
Anxious to see what the outcome is. They say it is like Interstate vs, Intrastate laws. Truckers have to have licenses to carry goods to various stores across state lines and they seem to want to tax items coming in across state borders; or something like that. Not sure, but you mention Federal, it is because the Feds keep arguing about it that the state decided to lay the local groundwork in hopes that it will serve as a model or food for thought to the reps on the national level.
Boy we sure hope not.
mdc at mdc in Atl.
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Good catch… Yep..We have had a good friend helping us since last fall. She does about 10 hours per week on Fri. Sat. Sundays. I start the drafts in WL, log in new inventory and tag all new items, then wife does the cleaning, inspection and photography, Lisa then opens the WL draft and fills in the middle apart of the listing such as description, item specifics and checking off standard areas within WL and then it is saved to our Ready for Review folder. I then open the listing later and do the pricing and add keywords, attach photos and upload. All in all maybe 10 min. each. per listing.
Also Lisa takes our Ebay listings and does the copy and paste cross listings on Etsy. Though we have that process on hold, while we wait on WonderLister to get it’s Etsy module up and going.
But yep.. 3 of us on weekends. Also this allows Susan and I to spend more time in procurement.
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