With the GOP Tax Bill on the verge of passing, President Trump has suggested that this 1.5 trillion-dollar tax cut will be a HUGE Christmas present for the entire United States of America. As with any type of new tax reform, there will be items you hear in the media about the winners and losers. You’ll also here about the major bullet points including the income tax brackets, the corporate tax cut to 21%, the small business pass through tax cuts, and certainly the minimization of state, local, and property income tax deductions on your itemized deductions. What really separates us from our competition is to work hard on digging several layers down to give you some insight into the small tax changes that you won’t hear about that could affect your bottom line.
Here are five things you didn’t know about the GOP Tax Bill
- Say Goodbye To The Home Equity Loan Deduction – The part of this bill that you did hear a lot about is that your existing mortgage deductions were completely safe. You also heard that new mortgages would have a cap of $750,000 for mortgage deductibility on new mortgage loans. Under the new plan the home equity loan/HELOC will no longer be tax deductible at all. This could have an impact on home renovation projects or those of you who took out two mortgages simultaneously when you bought your home.
- Will Snacks Disappear At Work? – For most people out there who have been a 1099 or own an LLC, you are only able to deduct 50% of the meals and entertainment attributable to your business. This doesn’t mean that you have stopped taking people out for a meal, but certainly you don’t let the tax tail wag the dog. For companies including Facebook and Google, all of the FREE food, snacks, and drinks they provide at work are currently eligible for a 100% deduction off their bottom line. With this new bill, they will only be able to deduct 50% of those expenses. Does this mean that we will back to using vending machines?
- 529’s Just Got A Whole Lot Better For Private Tuition – One of the reasons more people don’t put away even more money into a 529 plan is because they have always been a college (and graduate school) only plan, and could not be used for elementary school, middle school, or high school education. Nothing changes with higher education, but you will also be able to withdraw up to $10,000 each year, per child, to pay for private or religious school and receive the same tax benefits. Families participating in home schooling can also take out up to $10,000 a year to use for educational expenses. Also, families can roll 529 funds over to ABLE account which offer tax advantages for people with disabilities.
- Divorce Just Got Even Tougher – We know that divorce can be incredibly burdensome on the finances of a married couple. While child support has always been a non-deductible expense to the payer and not taxable income to the payee, alimony has always been a different story. Generally, the person paying the alimony can tax deduct it from their return and the person receiving the alimony would have to pay taxes on the income. Beginning with divorce decrees in 2019, alimony will no longer be deductible to the person paying the alimony and not taxable to the person receiving the alimony.
- Student Loan Forgiveness – I’ve been thinking for some time that the next real bubble was going to be the looming amount of student loan debt that is growing by the day. With Federal Government now allowing discharged debt under the student loan forgiveness program, if you cannot pay back your loan you will not be responsible to pay taxes on the amount of discharged debt. The really good news for your heirs is neither will they. Under the new provision, if you die or become disabled, you (or your family) will not have to pay back the amount of forgiven debt.
If you don’t know the best way to plan for these changes going into 2018, go to www.oxygenfinancial.net to get your tax plan off to a great start in the new year.