I have seen a couple of analysis of the impact it is significant but not catastrophic.
In real terms, more than 30 million taxpayers will no longer be able to deduct their charitable gifts, which will translate to a decline of more than $13 billion in charitable contributions annually. This decline represents between 4% and 6.5% of contributions according to studies by Lilly Family School of Philanthropy at Indiana University and Tax Policy Center.
I suspect that charitable giving (remember Bill Clintons $5 under ware donation to Goodwill ) is one of the areas most prone to abuse. No question in the short-term this will have impact on many charity, but other studies of countries that changed their deduction rules found a 2-3 year downturn followed by a return to previous levels.
At some point, the people who don’t understand it today will realize in maybe around that time frame that the same group will lose their tax cuts; in addition, the states with higher state taxes well… well when we see our taxes go up and not down, there won’t be much the GOP can do to hide that. This isn’t just one-off change. Why would moving to a standard form be beneficial to me if ultimately my taxes go up by a considerable amount, and I believe it will due to my state income tax? The fact I write off a few of hundred dollars now to charity that I can’t write off will just be salt to an already gaping wound.
Can someone tell me if under this new law I’ll still be able to deduct mortgage interest even if I don’t itemize? Because what with no personal exemption anymore it might not be worth it to itemize.
Because wealthier people needed the money a lot more than the beneficiaries of these programs, which should probably just get on with dying and “decreasing the surplus population,” right?
You never could write off mortgage interest unless you itemized. As I understand it you will still be able to write off mortgage interest up to a certain amount. Those with the largest mortgages will of course take the largest hit.
As for charitable giving, I don’t think the only reason people gave was for the write off, since for most people the amount wasn’t really that large. But charitable donations and work related expenses were probably the most faked items on the form. Charitable donations did have a computer verified limit, but it was pretty high for most people and just required a separate form to be filled out for non-cash items.
As I understand it the amount of mortgage interest you can write off is combined with state taxes, property taxes and can not exceed the threshold of $10k combined.
In other words: effectively you can not in most states
This will vary by person, but I will use myself as an example. I itemize some years and not other years. I am currently married filing joint. So in 2017 my standard deduction is 12,000 (+/_) and in 2018 it will be 24,000 (+/-), so I would need over 24k on my schedule A to make itemizing better. For me that isn’t going to happen short of some very strange occurrence.
Now since personal exemptions are gone it doesn’t really work this way, but that is what the GOP wants you to think. The more exemptions you would have had the worse off you will be under the new system.
I doubt (and I live in California) I have ever reached that $10k thresh hold adding mortgage interest and state taxes. But in some states and or geographical areas (big cities=expensive housing) they might.
I would think the group taking the biggest hit from the tax changes would be the home buyers in an expensive market and who are in a sales tax and high property tax state. So your what, middle to upper middle class people who just are trying to make due in a expensive market.
I have heard it argued that states like California will have to adjust their taxing policies to counter what the Fed has done, but more likely people will just move to other states if they are able. The California legislature is not going to quit spending/taxing just because it is hard on its citizens, anymore than the feds are.
No that isn’t true. The mortgage exemption is separate from the state, local, and property tax. The combined limit for SALT is $10,000.
For mortgage deductions, the limits are reduced for new loans acquired for properties in contract after Dec 15, 2017, from the current $1,000,000 limit to $750,000
One significant change that didn’t get much coverage is the interest from home equity loan is no longer tax deductible. The exception is home equity loans use to purchase or substantially improve your primary residence. There is no grandfathering in for this. You also no longer will be able to do cashout refi to take a trip, buy a boat, or pay for college and deduct the additional interest.
Regarding charities, 70% of American take the standard deduction, the higher your income the more likely you are to itemize. Roughly 67% of American make deductions to charity so a substantial number don’t get a deduction. Donations to political campaigns aren’t deductible at all at Federal level.
Yet when we look at charitable giving.
In broad strokes, those with income between $100,000 and $200,000 contribute, on average, 2.6 percent of their income, which is lower compared to those with income either below $100,000 (3.6 percent) or above $200,000 (3.1 percent).[1] The effect is even more severe at the extremes, as seen in the figure below.[2] Public Charity Summary Tables | National Center for Charitable Statistics
Personally we get screwed on the SALT plus property tax limit but it looks like we’ll pay less due to the lower tax rates. Looking forward to fixing all this shit when the adults are back in charge.
I have always had trouble with the idea of deducting charity donations from your taxes. My giving to my church doesn’t mean that I should get to contribute less than my share of taxes, and considering how it seems the Trump’s abuse this, I am more inclined to get rid of it for good.
All this confusion. Luckily I live in the enlightened state of Florida. Here they have simplified things. There is no early payment of mortgage tax. Period. There’s a load off of my shoulders. Or some kind of load.
The new standard deduction doesn’t kick in till tax year 2018, right? In other words, this coming tax prep season (for tax year 2017) things will still be as before and have the personal exemption and the old standard deduction.
correct…but anything you want to deduct for your 2017 tax return must be done by Dec 31st of this year. Except for IRA deductions, I think you have until you file your tax return (or maybe April 15th) for that.
Californian’s have been moving to Texas, Nevada and Arizona in droves supposedly, although the state keeps growing. Personally I would move to your state if I left here. :)
I think home building is currently at a 11-12 year high right now. It will be interesting to see if this has any effect. New homes are booming here again.
You know where else they move Scuzz, Oregon. We’re going to be slightly less screwed as CA in this taxes thing but still screwed. And the housing prices could be an issue too.
I have known of several people who have moved to Idaho. I do know of two who moved to Oregon, one young guy who moved to Eugene and another who moved to eastern Oregon, who has now moved back to California.
Our housing prices are as high as they are because of the CA money coming into this valley. With few exceptions, you can’t really make that kind of money some of these houses would require you to make to buy them. We have a few celebrities that have their second, third, etc. homes here too. The housing market has outpaced the job market here for decades. Aka, a number of locals can’t afford to even rent here anymore.
I’m pretty sure I am going to be screwed by this tax change, but that will be easy enough to report in the end.
