Right now, Washington is working to change how Americans’ pay their taxes. It’s still early, and it remains to be seen if they will manage to put any of their ideas into law. From my chair as a tax preparation expert, I want to tell you how some of the proposed changes will impact what you will pay in 2018 – without any political slant.
So far, some radical changes are on the table. The original tax reform concept was to simplify tax code. Recent news suggests a more complex revision (which will make having a good working relationship with your tax accountant more important than ever).
Our current tax system provides savings for socially responsible activities. For example, there are significant tax credits for getting an education, having children or adopting, buying a home, green energy, etc.
The new reform seems to take away many of these incentives. As an example, under the current code, giving a deduction for home mortgage interest and property taxes helps the building industry and banking. Many working people depend on these industries for their livelihood. Every American should own their own home.
There may be some major tax saving opportunities in the new tax code which will save you money. Many small businesses will want to be taxed as corporations to take advantage of new lower corporate tax rates.
Most of my clients will pay higher taxes if the new regulations are passed. Eliminating our state tax deduction will likely not offset the new proposed lower tax rates: Californians currently deduct state taxes they pay at a rate between 8 to 10%. If the tax rates are reduced by 5-6% you will be paying higher taxes. Your increase could be about 2% more on this one item alone.
State taxes are only one of your current tax deductions which are scheduled to be eliminated. Other expiring tax deductions include:
- Flex Childcare Deductions
- Reducing 401-K Retirement Savings amounts
- Business Deductions for Employees
- Gambling Loss Deductions
Americans pay lower taxes than most other countries in the world. Not matter what tax reform is enacted, every taxpayer should develop a tax strategy with their tax accountant to make sure they are paying the possible lowest tax.
Call today to schedule a free consultation to see if we can help you reduce your taxes.