Although many people, myself included, doubted it would happen, the Senate passed the Tax Cut Bill. Big changes are coming to the tax system, although all the details still need to be hammered out. These changes will affect billions of Americans and it will affect all of us either positively or negatively.
It’s impossible to walk through every possible scenario, but there are two main groups that will lose out the most from these proposed changes.
Big changes are coming to the tax system, although all the details still need to be hammered out.
The main change we can expect is that the standard deduction will be doubled. You’ll notice if you look at your previous tax returns, that you either take a standard deduction or use itemize deductions. The average married couple right now can deduct $12,000 from their income, and with this new plan they could deduct $24,000. This means most people won’t take itemized deductions, such as gifts, tithes, mortgages and student loan interest in the future, as they'll get more money back by taking their standard deduction.
The first group most affected by these changes are those worried about not being able to deduct mortgage interest, including realtors, home builders, mortgage lenders and others in that industry. This group doesn’t worry me very much. Deducting your mortgage interest won’t affect the average person, as you still benefit from the higher standard deduction. The main reason this doesn’t concern me is that you should never be purchasing a house for the tax benefits. Always purchase a home you can afford and let the deductions be a fringe benefit.
The second group affected by this change in deduction, though, makes me worry. People often use charity donations,tithes and similar expenses to itemize their deductions and increase their tax returns. Without the incentive of these deductions, will people give as freely to charities now? Traditional conservatives don’t believe the private sector needs an incentive to donate, but history suggests otherwise.
Without the incentive of these deductions, will people give as freely to charities now?
I want to believe we’ll see just as many donations if not more in the upcoming year despite these changes. Many of my favorite clients are those who come to me not because they want to get as much money as possible, but because they want to know how to use their wealth effectively to help the world around them. They’re not always wealthy clients either. I recently had a middle class couple who was just barely saving money, but came to me to see how they could find a way they could use what little extra funds they had to give more to others.
I can help you do the same with your money and together we can ensure our local charities and organizations don't suffer under this new tax code. We can discuss not just how to make you money, but how to help you give the way you’ve dreamed.