To make things EXTRA CONFUSING, there are two bills circulating congress right now. One for the House and one for the Senate. To help you understand the bigger items at play, we are highlighting the “broad strokes” or important similarities between the two bills.
Here goes nothin’…
- Increased the standard deduction:
In an effort to simplify the tax process for the average joe, Trump’s plan raised the minimum amount it takes to make deductions from your taxes at all.
The way it used to be, if you had aprox. 6k or more in deductions, you had to provide an itemized list… Let’s call that a headache and a half… But now, Susie Creamcheese (my scapegoat example for everything) doesn’t need to itemize because the minimum is aprox. 12k and MOST people, won’t have that much to deduct.
- A limitation on the amount of mortgage expense that can be deducted:
So right now, if you buy a house and your interest is up to a MILLION BUCKS, you can deduct that from your taxes. This encourages home ownership and people stabilizing their finances (and therefore the economy) through owning a home.
The new legislation being proposed in the House, seeks to cut that limit (1 MILLION) in half to $500,000. SO, people who own very expensive houses (think east coast, west coast) will literally pay the price.
- “State And Local Tax” Deduction will be GONE:
Right now, there is something called S.A.L.T, which is short for State and Local Tax [deduction]. Basically, you get to take out what you paid to YOUR state before paying the Government. To give an example: if you make 50k in Oklahoma, FIRST Oklahoma will tax you on that 50k. Let’s say you owed them 7k. THEN, the Feds would only tax you on 43k (meaning you would owe LESS than if they taxed you on the full 50k you make).
This law, cuts taxpayers a break at the expense of the federal government… And the Republicans in the Senate would like to throw it out in favor of helping the feds (which is a little weird because they usually favor smaller government and like keeping out of your wallet), and the House would just like to cap it off.
- Cutting the Corporate Tax Rate:
Think of who is doing this… TRUMP. Obviously one of his largest motivations in running for public office, was to create more user-friendly, economy boosting tax codes. This is his piece.
What it does it reduces taxes that big companies have to pay from 35% to 20%. BINGO. That saves corporate America quite the sum. Pretty clear cut. The bill also (MY FAVE PART…..) lowers tax rates for small businesses! Hoping to spur all of us millennials towards our entrepreneurial destinies.
Hopefully, this will help spur our economy.
- Rules that put America First:
Again, pretty clear cut… President Trump has made it NO SECRET that he wants America looking out for America. He reflects this sentiment in his tax bill by seeking to tax any companies outsourcing labor or selling their product abroad. The detail of this are forthcoming as they are complicated and will take careful review by the Ways and Means Committee.
These tax changes are a BIG DEAL.
I want to remind you, that you should look at members of congress as YOUR employees… YOU literally pay their salary! If your nanny, or assistant, or housekeeper was doing something you didn’t like, you’d let them know! Likewise, if they’ve done a great job, you’d probably tell them that too.
If there are parts of this bill that you don’t agree with, CALL YOUR REP! None of this is set in stone or a done deal. You can help shape the future of how much gets taken out of your paycheck, by calling.
If you’d like a little more context for these changes, check out this post on the federal budget/ debt we are in.
HOW TO CALL:
- Figure out who your reps are.
- Call (202) 224-3121 and ask for your rep’s office.
- Tell the very nice intern on the other end of the phone why are you are calling in a brief statement.
*It is important to note, that ALL of the details can be changed while congress bickers over the specifics. That said, SBA will do our best to help you #keepcurrent with all the updates in this bill!