Tax Bill Takeaways

It looks like the US federal government doesn’t want us to have kids or live in big homes. They certainly don’t want grandma to house their unemployed and disabled children and grandchildren and be able to claim them as dependents.

The big takeaway is the Personal Exemption that currently allows us to deduct $4050 for each filer plus their dependents. A married couple with 4 children can currently take a deduction of $24,600 plus another $12,600 using the $6300 standard deduction. The combination of these deductions is $37,200.  The proposal would eliminate the Personal exemption and raise the standard deduction for this family to $24,000.  Supposedly, the increase in the child tax credit from $1000 to $2000 could make up this difference, but how that works is unclear.

The limits being imposed on mortgage interest deduction being capped at $10,000 per year will limit the construction of homes that cost over $1 million, but the wealthy are more likely to pay cash for these mansions they have always considered to be “investments” that appreciate. This will also depress the real estate markets in all high property tax locations, because it will limit the number of buyers for these homes.

The taxes required on the “gain” of selling your home remain at $250,000 per individual and $500,000 per couple filing. would force sellers to report any gain over these amounts as taxable income. This could make couples to sell their homes before one of them dies. It also discourages couples from buying homes that are priced above these limits.

If the couple can keep their homes until they die and leave their home to their heirs, they may be able to dodge the “gain” taxes.  The Inheritance tax exemption is currently $5.5 million and is going to double to $11 million for individuals and $22 million for couples.

The limits being imposed on state and local tax deductions being capped at $10,000 per year will hit high earners in high cost areas in all high tax states and change the game.

If companies continue moving their operations to lower tax states, the economies of these high tax states will continue to decline. These states need to cut spending, but they won’t. Their legislatures are owned by their government employee unions.

We have two economies. One is affluent and they live in high cost areas, because jobs in these cities pay more. The other economy exists in areas where costs are less and so are salaries. This has always been the case.

The other takeaways include the end of deductions for State and local taxes, losses due to theft and disasters, standard deductions for retirees, interest on student and home equity loans,

The only parts of the Individual Tax Bill that makes sense is to remove the Obamacare individual mandate and increase the exemption for the inheritance tax.

Norb Leahy, Dunwoody GA Tea Party Leader