Tax Reform: The Devil’s In The Details

Over the years, one of my “beats” has been an occasional publication called the Legislative Defense Alert. The idea was to warn readers of legislation that might threaten their wealth, so they could prepare.

There was only one problem: After the 2010 midterm elections, nothing ever happened on Capitol Hill.

There was plenty of light, of course, since Republicans controlled the Capitol and a Democrat occupied the White House.

But no legislative heat … just gridlock. Nothing to write about.

The biggest sleeper in the new tax regime is the elimination of almost all “miscellaneous deductions.” Believe me, you’ll thank me for alerting you to this little morsel now, at the beginning of the year, when there’s still time to do something about it.

Even with GOP control of Washington in 2017, there weren’t any major legislative changes — until the biggest revision of the U.S. tax code since 1986, passed at the end of December.

The Tax Cuts and Jobs Act was written in secret and subject to no formal debate. Most legislators voted on it without having read it. Consequently, many of the details are only now becoming clear.

When it comes to warnings, however, better late than never … especially when your money is involved.

One Hand Giveth, Another Taketh Away

There’s been plenty of good news about the recent tax changes … but there’s a lot of hidden bad news too.

Besides temporary reductions to personal tax rates and a huge slash at corporate rates, the new tax rules also doubled the standard deduction, to $24,000.

But legislators had to pay for all this somehow — or at least, appear to try.

One casualty that affects everyone is the personal exemption. Until 2017, every taxpayer could reduce their taxable income by $4,050 per person in their household. Not any more.

Another change with widespread impact is home equity loan interest. Unlike mortgages over $750,000, there’s no grandfathering provision, so if you have a home equity line of credit (HELOC), your taxes just went up.

You can’t deduct moving expenses, either, even if they result from a job change. And you can say buh-bye to deductible casualty and theft losses, unless they’re due to a presidential disaster area declaration.

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