Where will it fall out for you? This a brief summary of many proposed House tax provisions that could likely affect most of our clients. 12% of our clients worry about the impact of government on their lives. Revision of the tax code is a perfect example!
If you already itemize, you may be losing some deductions. Medical expense deductions might be eliminated entirely. Real estate tax deduction may be limited to just $10,000. The income tax deduction would be eliminated. Mortgage interest deduction would be limited to $500,000 debt for acquiring a new house/or substantially improving an existing one and eliminating it entirely for second homes. All good for the middle class and bad for the rich.
The standard deduction would increase to $24,400 for joint returns and $14,400 for single filers. Good for those who haven’t been able to itemize.
The Alternative Minimum Tax would be eliminated. Good perhaps for the rich and they are the ones who have had to pay it!
Exclusion of $500,000 (joint return) and $250,000 (single return) in capital gains from sale of principal residence moves from living in the property two of the previous five years to five of the previous eight.
Personal exemptions of $4,150 for each in the household are eliminated. Bad for large families.
The number of tax brackets would reduce from seven to four – 12% up to $90,000 for joint returns and $45,000 for individuals, 25% up to $260,000 joint ($200K individual), 35% up to 1M ($500K single), and 39.6% over those amounts.
To find out how these changes will directly you, you will need to review your tax return, consult with tax professional and your financial advisor once it is signed into law.
Bill Mayer, CFP