Tag: law

Patience and the New Tax Law

Around this time every year, there’s a lot of talk about taxes at home, at work, and on TV. Those tax talks have become more urgent with the December 2017, passing of the Tax Cuts and Jobs Act. The new tax law impacts every individual and business taxpayer. How it impacts you and your tax bill depends on many factors – family size and composition, income sources, and geographic location.

 

One thing is for sure, answers about how the new law will impact your tax bill are not quick or easy. Figuring it out will take some patience and time. A lack of patience and a rush to act may backfire on some taxpayers. How to interpret the new law is not entirely clear. Remember the lines to pre-pay real estate taxes in high-tax states? The IRS announced those payments would not be deductible without a tax bill in hand. Some tax experts disagree. Who is right?

 

Less than a month after passing a new law is too soon for all the details and unintended consequences to be fully explained. The Tax Courts are filled with cases where each party is interpreting the law differently. However, some tax projection calculators are available to help many taxpayers determine what their new income tax bill will look like. One issued recently by the Tax Policy Center appears to be easy to use – http://tpc-election-calculator.urban.org/.

 

An online tax calculator cannot address all possible scenarios and considerations. Taxpayers with more complex situations and decisions, such as business owners, should schedule a consultation with a qualified tax professional. For a tax professional to serve your needs, be prepared to discuss your current family, income, business, and investments. Also share information about impending or planned changes in your situation. Those details make a big difference in the tax advice that is right for your situation.

 

Your tax professional will use the information you provide to project, analyze, and identify tax planning opportunities based on your situation. Figuring it out takes patience and time. Yes, it’s still too early to know all the details about the Tax Cuts and Jobs Act. But being patient and investing time with a qualified tax professional will get you started on the right track.

Tax Reform Facts (so far, anyway)

Taxpayers and their advisors want to know as soon as possible — as in “now” — the impact of any upcoming tax law changes. We still don’t know many details, but the White House has proposed tax code changes which include both individual and business reform.

 

The upcoming months will see significant discussion and changes to the initial tax proposal put forward by the Trump administration. Until then, Americans will have to make plans based on the limited information made available at the White House press briefing to unveil the President’s tax reform plan on April 26, 2017.

 

Here’s a summary of the tax reform fact sheet that was handed out back in April:

 

Goals for Tax Reform

 

  • Grow the economy and create millions of jobs — no details provided.

 

  • Simplify the tax code.
    • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.
    • Protect the home ownership and charitable gift tax deductions.
    • Repeal the Alternative Minimum Tax (AMT).

 

  • Provide tax relief to American families — especially middle-income families.
    • Reduce the seven tax brackets to three tax brackets — 10%, 25% and 35%.
    • Double the standard deduction.
    • Provide tax relief for families with child and dependent care expenses.

 

  • Lower the business taxes.
    • 15% business tax rate.
    • Territorial tax system similar to American companies.
    • One-time tax on dollars held overseas.
    • Eliminate tax breaks for special interests.

 

  • Other provisions
    • Repeal the estate tax.
    • Repeal the 3.8% tax on high-income wage earners.

 

The Trump administration and Congress still have a long way to go before new tax laws are drafted, argued over, and passed into law. That makes it tough for taxpayers and business owners to plan between now and then. Decisions that can’t wait should be based on available information, while keeping potential tax law changes in mind.