 This is State Tech Hawaii, Community Matters here. Hello, how are you doing? Oh gosh, here we go again. Gordo, the techs are here. Another pretty unusual episode of Hibachi Talk. I got my good old buddy, Rick, the fundmeister here. Hey, Gordo. And our good old friend Larry Smith is back again. So we've got two heavy-duty bean counter types here in the house. You know, these guys know money. Well, they know money. Supposedly they know money. We got no money. We got less to have. Anyway, we're going to talk about the new federal tax laws. And so grab yourself a chair and a libation and sit down and join us. And we're going to try to explain to you, no, we're not. We are not tax consultants. We are not tax advisors. My disclaimer here. This is just our observations. If you've got any questions or concerns about any of this stuff, you check with your CPA, your financial advisor, and your tax account. And based on what we're trying to understand with this new tax law, you better be talking to them by at least the third quarter. If you don't have one of those people, you need to get one by around September to help you go through all of this. Because it's pretty incredible. And confusing as hell. And we've had discussions today already about, well, no, I researched this and it says that. No, I researched it. It says something else. It's just kind of going to be fun kind of conversation. So we'll talk about the upsides first, if these are upsides. All right, so we'll pop up the first slide and it's under the current law. We have seven tax brackets and the bill that the president signed has new tax brackets. And so if you can see the bill that was signed in the second paragraph or paragraph there, 10%, 12%, 22%, 24%, 32%, 35%, and 37%. So, you know, the 37, that's a drop from the 39.6 that was there before, the 35%. We got that, we got, that's still there, 32 tweaks here and there. So, how are you guys going to do on that one? It'll help me since I'm retired. I mean, in a lower bracket. Yeah, so you're now in a lower bracket as a senior citizen. That's exactly right. So am I, I'm a senior citizen too and I'm in a lower bracket, hopefully we'll see that. And I also am retired and in a lower bracket as well. As well, so there may be an upside on that one. I don't think anybody's going to be, unless their income goes up. Right. Well, your income will go up because you're going to be paying less taxes, which may put you in another bracket. I never thought of that. What if you paid less taxes? No, it comes out afterwards. It comes out at the end. They do all the calculations in income. I got scared there for a month. Wait a minute. I don't want to do this. So anyway, so that's interesting. So I thought I'd just show, we pop up a slide and get a show. So the kind of the 10%, these are for the viewers that watch the show. They can always go back and look at these charts and see what the tax brackets are. No, next one now, please. So that'll be the one that says the 2018 tax rate for singles. So this is kind of like your tax rate now for singles. So you make between zero and $9,500. Why would anyone have to pay 10% on $9,500? You would think not. You would think zero. Yeah. Right? Yeah. And that's the same as today, at least up to the 90. Right. So it's actually going up. So in 12% between $9,500. See, I think personally, I think those tax brackets, those to be zero. Yeah. Yeah. Right? Anything, anyone making under $40,000 a year shouldn't be paying any taxes. You think. You think. Yeah. We weren't elected and we didn't make these rules. Which we don't. But we vote in the people that come up with the rules. Right. Right. Some Democrats, some Republicans and some others. So this is what they came up with. Anyway, so this just gives you a sense of what the numbers are. In the long run, the hype and the companies reacted seem to pan out that this is going to be a good thing. So you go look at the next slide, which is the couples. You get to see what happens on the tax rate for a couple filing jointly. Now it's zero to 19,000. So, you know, doubled it a little bit. Yeah. But still I don't a couple that makes $19,000 a year got to pay 10% tax. That's crazy. It's crazy. You can't live on. That's the livable wage. You can't live on that. You can't live on that. I mean, so I'm just going, let's have some common sense here. Just simple common sense. You know, if, well, but you can't use why as an example because we're such a high cost of state. But if you just took like some of the other states. Why? Again, we elect these people and they come up with this 2000 page new tax law. And 500, 600,000 and up a couple paying 37%. I think that's okay. Yeah. That's a third. Yeah. Which is kind of what your, that's the rough rule of thumb. Historically, you'd expect that level of tax. So, I mean, so those, those are, you know, that seems to be reasonable because my thought is that if someone, someone's or someone's making $600,000 a year, they're also spending a lot more money. Right. So they have a more, a bit more expensive house. They buy more expensive cars. They have bigger houses or whatever. So they're paying more taxes, whether it be property taxes, sales taxes, all of those kinds of things are coming back into the company. Do they have more disposable income? And they have more disposable income. That's someone that's making between zero and 19,000 and 50 bucks. Yeah. Just got to pay $1,200 a month for rent. It doesn't make any sense. It doesn't make any sense. You know, probably, I don't, we don't have that. But if you looked at the amount of tax revenues that would generate for the federal government for those, that's not where they're going to get all their tax revenues. It's more the middle class and the richer people are going to pay more of the gross dollars going in. They're going in. And that's what it is. And so, I mean, we're, again, it's just a lay person's common, we're just talking common sense here. Yeah. At that level, you're, you're below the government poverty level. Yeah. The government defined poverty level. Yeah. The government still wants to put their hand in your pocket. Yeah. And so that's really, I guess, part of the conversation that the government should have about, hey, if you're below the poverty level, should you really be paying taxes? Right. Shouldn't you be receiving? And if you don't want to wait for the Fed to do all the work, you have states here. The state of Hawaii could turn around and say, hey, if you're below the poverty level, we're not going to charge you a state tax. Right. No state tax. But they, they got the hand in the pocket too. Right. So, but so these people down at the big square building that are supposed to be taking care of us, that would represent us. Yeah. I'm not impressed. I'm actually depressed. So again, for those viewers who that watch this show, you got to start asking them why they got the hand in our pocket for all of the stuff. Yeah. Anyway, the race changed. Yeah. And, and such. So, but now my, my favorite one, this is one I think we're going to get some really good conversation on. Yeah. So the next slide comes up. It's the negative impact on high tax states like Hawaii. Yeah. So this tax law, this new tax law, high tax states, Hawaii, California, New York, we get beat. So not only are they got their hands in our pocket, now we no longer get the unlimited state deduction and local deduction. Yeah. It's capped at $10,000. Yeah. Right. So no longer now. So anyone that said, and guess what, I noticed something. Most of these high tax states are blue. That's right. Yeah. It's not a surprise. So, so. Blue. Do you mean Democratic? As in Democratic. Yeah. So, just for the audience, you here, you've got everything represented here. You've got independent Democrat and Republican. And we're not going to tell you who it is. It's Curly, Larry and Moe. Literally. Literally. Yeah. Curly, Larry and Moe. We got it. But depending upon the day of the week and the time of that day, either one of us could be, could, yeah. That's right. Different ones. We're having a conversation. I actually showed you where my Ben Carson hat today. You sleep though. It would be a very dull meeting. Anyway. But no more unlimited state and local tax deductions. So that, that to me is like, that was a really a stick. Especially for Hawaii. Yeah. Yeah. That's a big factor for us. California. Because we both have relatively high, we have high income tax rates. Right. Well, it's actually fairly reasonable property tax rate. But the value of the property is higher. Right. So if you listen to the propaganda from certain political parties locally. Yes. We have the lowest property tax rate. Yes. But they don't bring up the fact that our property tax is much higher than if we had a similar house in Little Rock, Arkansas. Yeah. Or Wisconsin. Yeah. Something like that. Anybody that watches HGTV knows that what we pay here is not what they pay there. Yeah. But what they pay there is what we use for a 5% down payment. That's right. Yeah. Yeah. So that's going to impact us. And probably, you know, even more, you know, more certain in states that even have higher property taxes, which, you know, California and New York have higher property taxes than we do. Right. Yeah. So all of a sudden, you know, so, but people, you know, as, you know, what has happened historically, whatever you paid, you, at that state, at the state and local level, you can deduct that before you got to that taxable income rate. Right. Now, only 10,000. Only 10,000. So if you happen to be a higher, so even though you might get a break as a high income individual on the rate you pay, you might not be able to deduct your full state taxes to get to that, the number that you apply that percentage to. Right. So that becomes a wash. Yeah. And I think, and again, that's why you've got to talk to your, and your financial advisors is the fact that when you start looking at the blending of these things, this could possibly be in a state like Hawaii a negative. Yeah. Right. This change could be a negative. I don't know, but it's sure. And one of the things is it may not impact you, you know, this year or next year, but as our property, our property taxes, or I'm sorry, our property values go up. Right. And we all know, I mean, all of our property values have gone up. The statements now, the assessed value of your property that comes in and I'm going, remember when assessed value of property and appraised value of property used to be really far apart. Yes. Now the assessed value are like they're all like, they've all crept up and they're over left. So those assessed values as they go up, you know, in a couple of years, if we didn't get hit with the 10,000 today, couple of years, you know, a lot of people are going to be moving up, moving up with the increase in the assessed. Yeah. We all got to be concerned about that. There's fixed income retiring types who are fixed income earners who, you know, have, you know, may not have a mortgage on their property anymore, but the property tax. It's going to continue to rise. It continues to rise. And that, and that becomes like it was when they were paying their mortgage before. Right. And I don't think that $10,000 is what, you know, what people would call index. That means, okay, if it's $10,000 this year, then, you know, it might go up by another 5% next year and another. I don't know, but I'm believing that it's 10,000. That's it. And five years from now, it's still going to be 10,000. When we were working at the sitting and counting, we put in a computer system that allowed the tax assessors to use Google Maps and various other programs, ArcGIS and stuff to analyze property without even going out to the property and reassess your property without even going there. And then they go like, oh, there's another building on that property. And wait, oh, we got to add more tax. Oh, wait a minute. They never got a building permit. So now we're going to go chase them for a building permit. But while they're chasing you for a building permit that they didn't have, we're still going to tax you for that. Yeah, we're going to put the assessment up. Yeah, it's another $100,000 just went on your property. So, again. And another factor in this is also not only is there property tax and income tax, but you can deduct, I'm not a tax advisor, but I read on Google through Bing, so that you can deduct that or sales tax. Oh, yeah. One or the other. If you're thinking about buying that yacht you've been saving up with your entire life, the sales tax that you could deduct is up to the $10,000. So if you're having a once-in-a-lifetime event where you're going to buy something big. Buy that Lamborghini. Yeah. And rate the sales tax off. Right. Well, that is under that $10,000. You can check with your tax attorney, your advisor on that, but that's how I interpreted it as well. Before you write the big check for that Lamborghini, you might want to think about what the tax will be and you can only deduct up to $10,000. $10,000. Before you can take it over. Okay. Actually, we've went through it. We have to show already. It's amazing. Yeah. So we're going to take a break. We're going to pay some bills. We're going to come back and we're going to continue down this storyline of the layman's look at what the implications of the new tax laws are on us poor people here. Yeah. Back in a minute. This is Think Tech Hawaii, raising public awareness. Match Day is no ordinary day. The pitch hallowed ground for players and supporters alike. Excitement builds. Game plans are made with responsibility in mind. Celebrations are underway. Ready for kickoff. MLS clubs and our supporters rise to the challenge. We make responsible decisions while we cheer on our heroes and toast their success. Elevate your Match Day experience. If you drink, never drive. The host of Voice of the Veteran seen here live every Thursday afternoon at 1 p.m. on Think Tech Hawaii. As a fellow veteran and veterans advocate with over 23 years experience serving veterans, active duty and family members, I hope to educate everyone on benefits and accessibility services by inviting professionals in the field to appear on the show. In addition, I hope to plan on inviting guest veterans to talk about their concerns and possibly offer solutions. As we navigate and work together through issues, we can all benefit. Please join me every Thursday at 1 p.m. for the Voice of the Veteran. Aloha. Aloha. Gordo, the techs are here. Welcome to another exciting episode of You Watch Your Talk. Our conversation today is the layman's look at the tax changes that are in effect in 2018 as we're coming up on April to follow your taxes for 2017. I've done mine already. Pop and close. Oh, you're close. We're there. I'm okay with it. I'm not exactly thrilled. But I'm okay with it. It's fine. You're probably okay. And people need to realize that it's calendar year 2017. All of that activity is under the old tax law. And so if you didn't do anything to plan before 12, 31, 17, it is what it is. That's it. And so the big thing, I think one of the things we want to take away from this is you need to give yourself plenty of time toward the end of this year to think about what you're doing to find an advisor and to do planning so that based on what the advisor says, you've got two or three months to do whatever you want to do to impact your taxes. Yeah, don't wait till December 15, 2018 to do it. I'm with you. I think no later than September of this year. You need to be sitting, talking with your advisor and planners on it. If you're sitting around in January 19 and discovered something and it's the oh I should have or I could have, it's too late. It's the federal government is the calendar year. And that's what it is. So you need to take some time to plan it. So really, you know, September, October, you should know somebody be talking through it. So you've got a couple of months to do whatever you want to do. And I can guarantee you that the people down at the big square building down the street here are not putting any tax benefit packages together to cut a sub break based on that limit we talked about earlier. There's no way they're doing anything. They're just complaining saying that's the problem with the fact that we've got, you know, we've got a Republican as the president. That may be true but that doesn't mean you can't come back and help us as a Democrat. You know, but never mind to get their hands in the pocket. Anyway, so we're going to talk about the next thing we're going to talk about is the mortgage deduction. And this is going to take a little bit of conversation because Larry, we've all done some research on this and we've all got different answers. So this is the key. This, this is, we all have different answers and such, but we know for sure that the deduction for interest is capped at $750,000. So if you have an $800,000 mortgage into the future, into the future, into the future, you are going to, you're going to be capped at 800. So if you entered into that mortgage prior to December 15th of 2017, 17, you're fine. You're fine. So if you've got, but if you're signed that mortgage on December the 16th, 2017, and it was 800,000, you just lost the interest on that $50,000. Yeah, the tax benefit. The tax benefit is gone. On that. And that's, that's done. It's over. So perfect example of why you need to talk to planners. Now, did they even, did they even know December 15th? When do we sign this? When just, I think just after, before, I think it was around, around Christmas. I'm not sure. December 22nd. Before, but it was right in there. Yeah. December the 22nd was with it. This was a quiz. Nice job. But did December the 22nd. So anyway, so it's, my answer was conceptually before Christmas. Yeah. But, but there's still, there's still is a limit though of $1 million for mortgages that were established prior to December the 15th, 2017. So even then, it's got cat, cat, cat. Now, I just can't imagine a million dollar mortgage. Sorry guys, it's beyond my, I can't, my little people, buying, I say, I'm losing my breath just thinking about it. Can't get my head wrapped around a million dollar mortgage. Right. But mind you, cock-ock, yeah, cock-ock, all the prices, the condos and everything down in there. I mean, people came by 10, 20% down on 1.2 million, that still leaves. Yeah. See, another reason people would do it, from a financial standpoint, say you're a small business person, or kind of a semi-small business person, probably the lowest interest rate you could get to borrow money would be, if you had the house to support it, would be your mortgage. Right. So say your, your mortgage was 4.5% interest, and then you could deduct all of that interest on your taxes and you're in a 30% bracket. So you would borrow as much as you could on your house, because you're effectively paying 3%. Yeah. Because you're going to get that break. And then, so the fact that that money kind of went over and you spend it on your small business is another story. Right. But that was cheaper than going down to the friendly bank and saying, I'm going to open a small business. Are you going to give me 3% interest when they quit laughing? Yeah. They would tell you the right. Yeah. I've been there, been there, and done that, right? So a lot of people, you know, the house that could support, that had the appraisal to support the mortgage might have a pretty sizable mortgage. Right. Because it's cheap money. Yeah. For them to use in there. So that was... With the tax benefit, yeah. With the tax benefit. And that, but that's the old logic. So people that had been doing this all their lives are used to the fact that that house mortgage was a source of funding. Mm-hmm. And now, it's not. Yeah. So now let's throw the ultimate, I'm going to call this the ultimate curve, because I don't know, and we've both read. We don't know. Yeah. Home equity lines of credit. Yeah. Okay. A home equity line of credit. I have heard opposite stories. I've heard one is the interest deduction for home equity lines of credit gone. And I've heard, oh no, it's still there. And then I went and saw what the IRS said. And the IRS said the Internal Revenue Service said the taxpayers can continue to deduct the interest they pay on home equity loans in many cases, in quotes. But it doesn't tell you what the cases are. Yeah. So what are the cases that aren't? And so I'm sitting here with that confusion, plus it's also tied to the cap. Right. Yeah. Right. So if you've got a $500,000 mortgage and a $250,000 home equity line of credit, that's all you can have. Yeah. So if you've got a $500,000 mortgage and a $300,000 home equity line of credit, $800,000, cap of $750,000, again, does not get... Right. You do not realize the benefit on the interest on that one. Right. If, in fact, you can take it. Yeah. So you saw something that said that we get it, right? Right. But this is, you know... Is it online? Yeah. And see, it's probably so complex that this again is have... The Congress did whatever they did in their wisdom. Wisdom. And now these... Wisdom. The gnomes down at the IRS are trying to write regulations. Right. To implement something that could be kind of goofy. Yeah. And so they're trying to figure that out. And then your consultant or your tax advisor has got to learn from the IRS what they are saying. Right. And so again, this is before you start going crazy on home equity lines this year. Yeah. You need to talk to whoever your advisor is to get as much certainty as you can. Yeah. Because if you're saying a home equity line, because I've read some things. And again, these are the things I've read. I've educated ones. If you take out a home equity line of credit and you use it to upgrade your home. Yeah. You'll get that. But then how do you prove that I... Upgraded my home. Upgraded my home with that home equity line of credit and didn't go off and buy my Lamborghini. Yeah. But they get the 10%... And that would have upgraded my garage. There you go. Oh, there you go. See? In many cases. He's a good tax advisor. He's a good tax advisor. Yeah. I've got a Lamborghini in it. As opposed to a 40-year-old Lotus that hasn't run forever. Yeah. So, I mean... So, again, we're just... I'm trying to get to be understanding this is that there is no bad answer. I mean, I sat yesterday with an expert in the field and who told me, no on Helox. He said, no. And I said, what if I used Helox to buy another house? He went, no. And then I go to the internet and I bring up the IRS thing and I said, well, what about this? Yeah, exactly. Oh, well, what's the date of that? Yeah. Well, that was of February 27th. Yeah. So, this is a moving target. Yeah. Yeah. And what about, you know, if you have a reverse mortgage? I don't know how that works today. Oh, no. I clearly don't know how it works tomorrow. But how does it work? Who knows? Yeah. Who knows? What interest is deductible on that? And do you have to have a reverse mortgage before, you know, the end of last year? Again, this is why we're having this. These are hands-cracking. These are... Our purpose of this show today is to confuse the hell out of you. So, because it is. I mean, we've got pretty extensive financial backgrounds and we're stumbling to the beat of a different drummer every time we walk down the street around this stuff. We just don't know. So, you know, as you're talking to your family and you're looking at business transactions you want to do, how you've done it for the last 30 years is different or could be different. Could be different. So, you just can't say, we're going to do this and we're going to use that home equity line to get it done. It might not work anymore. Or you're going to end up paying a big price come tax time if you do it the way you use it. And you thought you were going to get an $8,000... If you paid the $8,000 in interest, you thought you were going to get a benefit of that. And it wasn't there. And then couple that to the fact that we're a high-tax state and the $10,000 cap. Right. And you can get there a lot quicker. We can get there really quick. You add that to it. So, you know, this... I don't think Hawaii's going to bear all that well as a result of this at all. So, and then... So, then there's... And again, there's so many things in this and I just tried to pick like the top maybe five or six things that are of interest. Now, let's go... We'll go to your retirement savings. And that's all changing as well. So, your IRAs, your Roths, your 401Ks, all of that stuff is going through changes. Capital gains tax is changing. All kinds of things are happening in that space. And I spent at least a good couple hours reading it. And at the end, I was even more confused. I was like, I just don't... I don't understand it anymore. And we're getting to that age where we have to start drawing down on our retirement monies. Let me put this in a higher-tax bracket. Right. You know? Oh, a minimum. Just take the minimum. We got all of that happening. And so, you've got to, again, you've got to be talking to your financial advisor about that. You did increase the amount that you can contribute to your 401K. Yeah. Yeah. So, that went up $500. So, that's good. $500 to $500. Yeah. But, you know, those... there's limits now, which are there before. Your savings in IRAs and how they're looked at, that's all being looked at. Contributions to Roth. Here was one that, you know, I thought was ingenious and I was looking at it this year. If I could roll over my 401K to a Roth IRA, when you take your money from... This is what my understanding is. Don't bet on it. It was my understanding. If I'm taking my contribution out from my 401K when I'm supposed to at 70 and a half, that's a taxable event. But if I'm taking my contribution out of a Roth IRA at 70 and a half, that income is not taxed. That's my understanding. That's my understanding. Maybe not today, but last year. Last year. Today, that might be different. Yeah. So that might be different. So anyway, we got a minute. You got any last kind of comments you want to say to the viewers on this stuff? So because you're in it like me. Yeah. I'd go back to what, you know, Larry said originally is, come September, make sure you know who you want to go through to talk about what this tax implicate, all the implication is for you and your family. Right. It's finally usually the point you really need the experts in here. And I can hardly wait to see what TurboTax and all those other players are going to do out there, you know, when we've got to go file your return. It's going to be insane. I think we have lots of questions amongst ourselves. Yeah. And let's throw up the disclaimer at the end because I want to make sure we say this at the last slide. We are not tax advisors or consultants. CPA, financial advisor, tax accountant, prepare a list of what you should look at in 2018 and meet with those people that know it before December 31st, 2018. Absolutely. Three months before. Anyway, that's Kibachi talk for another exciting day. We're covering all kinds of topics. Last week was Tupperware. Yeah. This is about the same, you know, Tupperware to tax. I mean, who knows what we're going to do next week. We're in the T's. Oh, but we could talk about it. Yeah. Oh, here we go. Anyway, Gorda the tech star, Rick Zavonmeister, Larry, it's always great to have you on the show. Yes. Fun. We'll see you again next week. And like we say at the end of every show, one, two, three. How are you doing?