View Poll Results: Are savings from a tax law change "income the tax payer did not earn"?

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  • Yes, if the government takes less-it is unearned income for you

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  • No-it was money you earned in the first place

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Thread: Are savings from a tax law change "income the tax payer did not earn">

  1. #101
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by cpwill View Post
    So I buy a nice little house in Alabama for $150,000, and I raise my children in it, grow old, and 35 years or so from now, get ready to retire and move down to Florida to be with the other old people. My house has kept up with inflation, which has averaged at 2.5% a year, bringing the house up to $365,000. Mind you, it's still the exact same value, just inflation has cheapened the dollar.

    Yet I'm going to get taxed for $215,000 of "unearned income". Tell me, how the hell is that "unearned income"? In real terms, I didn't even make a dime. Or, if I put in the time and labor to turn my basement into another bedroom with a full bathroom plus a living room, and that boosts the value of my house another $35K, plant some nice trees and do a little landscaping that gets me another $5-7K, and then pay to put in a pool that increases the value of the house by the exact price of the pool, how the hell is that "unearned" income? I went to quite a bit of effort, time, and labor for some of that "income", and paid full price for the pool the first time around.
    First off, most improvements/upgrades cost more than you'll get back when you sell. The best investment is updating kitchens, which returns ~80% of the investment. Second, the cost of those improvements is deductible from the gains. Third, you've overlooked the IRS rules on capital gains InRE the primary residence:

    Sale of Your Home

    Report the sale or exchange of your main home on Form 8949 if:
    - You cannot exclude all of your gain from income, or
    - You received a Form 1099-S for the sale or exchange.

    Any gain you cannot exclude is taxable. Generally, if you meet the two following tests, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1).

    Test 1. During the 5-year period ending on the date you sold or exchanged your home, you owned it for 2 years or more (the ownership requirement) and lived in it as your main home for 2 years or more (the use requirement).
    Test 2. You have not excluded gain on the sale or exchange of another main home during the 2-year period ending on the date of the sale or exchange of your home.

    Even if you do not meet one or both of the above two tests, you still can claim an exclusion if you sold or exchanged the home because of a change in place of employment, health, or certain unforeseen circumstances. In this case, the maximum amount of gain you can exclude is reduced.
    2011 Instructions for Schedule D (and Form 8949) (2011)


    In your hypothetical case you owe nothing in capital gains tax for the sale of your main home
    even if you're single and didn't purchase a home/condo/property in Florida.

    If you're married you could have gotten up to $650,000 for your home (not including cost of improvements like your pool!) without paying taxes on it and if you bought a home/condo/property in Florida you could subtract the purchase price on that from the sale of your Alabama home.
    Last edited by MoSurveyor; 07-25-12 at 01:10 AM.
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  2. #102
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by Neomalthusian View Post
    Nice try. Slaves are never allowed to agree to the terms/conditions of the arrangement.

    In that sense, it's the liberals that want to usher the coercion inherent in slavery back into society, by forcing one side of a contract to its terms without their own consent/agreement.
    What consent/agreement are you talking about? If laws are changed you DID agree to them assuming you're a citizen and haven't been mistakenly stricken from the voting records by a Repo voter purge.
    Mt. Rushmore: Three surveyors and some other guy.
    Life goes on within you and without you. -Harrison
    Hear the echoes of the centuries, Power isn't all that money buys. -Peart
    After you learn quantum mechanics you're never really the same again. -Weinberg

  3. #103
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by MoSurveyor View Post
    I've been watching people - most notably politicians, advertisers, and other salesmen - deceive other people for decades.
    Yes. And apparently your conclusion has been to decide that the deception is the reality. That in fact it is not deception, but merely a new title, a new description. That language which does not correspond to reality is as legitimate as language which does.


    That is sad, but that does not mean that we are going to indulge you in it.

  4. #104
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by MoSurveyor View Post
    First off, most improvements/upgrades cost more than you'll get back when you sell. The best investment is updating kitchens, which returns ~80% of the investment. Second, the cost of those improvements is deductible from the gains. Third, you've overlooked the IRS rules on capital gains InRE the primary residence:

    2011 Instructions for Schedule D (and Form 8949) (2011)

    In your hypothetical case you owe nothing in capital gains tax for the sale of your main home
    even if you're single and didn't purchase a home/condo/property in Florida.

    If you're married you could have gotten up to $650,000 for your home (not including cost of improvements like your pool!) without paying taxes on it and if you bought a home/condo/property in Florida you could subtract the purchase price on that from the sale of your Alabama home.
    That is excellent to hear about housing, but it still does not speak to the point, which was that since capital gains does not account for inflation it taxes "growth" that never occurs.

  5. #105
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by TurtleDude View Post
    Some posters have claimed that the Bush tax rates (now the Obama tax rates) which resulted in taxpayers receiving "Unearned income". In other words if you made 500K and your pre-Bush tax law Federal income tax was 150K and after the new tax rates were passed your tax became 135K does that 15K savings constitute 15K UNEARNED INCOME to you?
    Bush made it quite clear when he proposed them, he said "The Govt. is taking too much of your money". One of the few truthful things he said. Because of Clinton, the Govt. was in fact running a SURPLUS so the tax cuts were to give the extra back. Of course we still had debt but Bush was not one with a head for accounting...or anything else for that matter
    But according to how Bush announced the cuts, as soon as there was no longer a surplus, the "reason" for the cuts was no longer valid. Like so much of what Bush did, it didn't quite turn out the way he said it would be. But there is a reason those cuts were never made permanent and it has to do with adding too much to the debt. We can't afford them, never could.
    Yes siree pardner, we got bushwacked

    Last edited by iguanaman; 07-25-12 at 02:06 AM.

  6. #106
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by cpwill View Post
    That is excellent to hear about housing, but it still does not speak to the point, which was that since capital gains does not account for inflation it taxes "growth" that never occurs.
    If I was making $40k/yr in 2000 and was making $50k/yr five years later with a 5% inflation rate over those five years, have the taxes on my salary gone up? Obviously they have - the IRS will be taxing me on $50k, not $40k - so I am being taxed on inflation regardless of the fact I had no actual gain in salary.


    Political pundits for the party in power will also likely point out that my wages have increased by 25%.
    Last edited by MoSurveyor; 07-25-12 at 02:34 AM.
    Mt. Rushmore: Three surveyors and some other guy.
    Life goes on within you and without you. -Harrison
    Hear the echoes of the centuries, Power isn't all that money buys. -Peart
    After you learn quantum mechanics you're never really the same again. -Weinberg

  7. #107
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    Re: Are savings from a tax law change "income the tax payer did not earn">

    Quote Originally Posted by cpwill View Post
    Yes. And apparently your conclusion has been to decide that the deception is the reality. That in fact it is not deception, but merely a new title, a new description. That language which does not correspond to reality is as legitimate as language which does.

    That is sad, but that does not mean that we are going to indulge you in it.
    If you follow the money then it doesn't matter what label an accountant or a politician puts on it you still know where it came from and where it went - there is no deception. You can only be deceived when you decide to follow the hand without the coin (in this case, the label), that's when the magician makes the coin disappear.


    BTW - Do you have a mouse in your pocket or are you a Prince in Okinawa? The Holier Than Thou attitude is showing even more than normal with that royal "we". Another excellent reason to suspect your words.
    Last edited by MoSurveyor; 07-25-12 at 02:37 AM.
    Mt. Rushmore: Three surveyors and some other guy.
    Life goes on within you and without you. -Harrison
    Hear the echoes of the centuries, Power isn't all that money buys. -Peart
    After you learn quantum mechanics you're never really the same again. -Weinberg

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